Can You Buy a Business With No Money Down?
As a business broker I was asked this question practically every week:
The answer is yes and no depending on how you define “buy a business with no money down.” Specifically, it all comes down to whether or not the seller walks away at closing with a down payment.
If you believe that a seller will hand you the keys for nothing more than your IOU Note, you’re in for a big disappointment. On the other hand, if you’re more sophisticated and understand the ways in which you can use the company’s assets to finance your down payment, you will may be able to work out a deal where your personally don’t put any money down but the seller still walks away with a down payment.
If you really know what you’re doing you will use the 75/25 strategy for acquisitions of small businesses. This means that you cut a deal where the seller takes back a note for 75% of the price and you use the business’s cash flow and assets to create the 25% down payment.
So, yes it is possible so long as the seller gets something reasonable at closing like a 25% down payment on the total selling price.
No one says that down payment has to come out of your pocket.
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Who Does the Broker Represent in a Sale?
A common mistake that buyers make is to assume that a business broker either represents their interests or is neutral at the very least.The truth is that if you contact a broker about one of his listings, he represents the best interests of the seller. Indeed he is legally obligated to do so.Keep this in mind when dealing with brokers and keep your cards close to your chest. Anything you reveal about your weaknesses as a buyer will be used to screen you out as a serious candidate.
How Do You Start Building Great Wealth?
If you want to build something great in the world of business, you basically have two choices.
One, you can wait for the next Google-type idea to come along and jump aboard–that is if they let you. However, this is a long shot. There’s only one Google, only one Microsoft, only one Apple, etc. Yes, they are all replaced eventually by an upstart but it’s a bit like waiting for Halley’s Comet to come along. In the meantime, life is passing you by.
Two, you can accept that much of business, just like sales, is little more than a numbers game. If you’re a so-so salesman who just happens to make a lot of sales calls and presentations, you are highly likely to do well over the long run. This approach holds true in most of life. Recall the famous story of Babe Ruth who in his day was not only the home run king but also the strike out champ. In fact, he struck out twice as many times as he had home runs. However, history remembers him for his successes not his failures.
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