I know I probably sound like a broken record and regular Financial Slacker readers are probably tired of hearing me talk about trying to buy a business. And to tell you the truth, I am actually getting a little tired of it too.
But as I look at business after business, the one thought that keeps popping into my head is that the owners are looking to cash out of a sinking ship. It’s the same thinking that motivates garage sale shoppers. One man’s trash is another man’s treasure.
When I managed acquisitions as a profession many years ago, I came to the conclusion that owners only sell their businesses for one of two reasons.
Either they’re offered stupid money or they’re in trouble. And since I’m not likely to offer anyone stupid money, the businesses that I’m looking to buy will tend to be in trouble.
I know you will hear from company owners that they’re selling because they want to retire. And while that may be true on one level, if the business was doing well and was fun, they wouldn’t be looking to retire. I know people in their mid-60’s that are running businesses and they have no desire to retire. They may step back a little and let someone else handle certain aspects but they still want to own the business.
As a buyer, a business in trouble isn’t necessarily something you want to avoid. In fact, finding a business that’s undervalued for a specific reason that you believe can be remedied is a great reason to buy a business.
Sometimes companies outgrow their owners. Others need capital to grow or even to sustain the current level. And still others can’t adapt to a changing environment. If I can buy one of these businesses at a good price and fix whatever is wrong, I have a good chance to be successful.
But seeing what is wrong and being able to fix the problem is easier said than done. And after having spent 20 years analyzing businesses by applying a high-degree of skepticism, I am finding it quite difficult to see the hidden opportunity in these business for sale.
Instead, all I can see are the negatives. I see reasons why the business cannot be successful. I have always been the voice of hesitation and without an opposing voice of optimism, I have been unable to pull the trigger.
So my question to readers is, how do you get past your biased tendency to only see the negatives? What strategies can you employ to create a feeling of detachment that’s necessary to objectively view a situation?
