If I could do it all over again… I wouldn’t

starting over

I get anywhere from twenty to fifty questions a day from entrepreneurs like you. You usually ask me a variety of questions ranging from what I do everyday to how I make money.

But one question that seems to be stuck in your head is: what business would you create if you had to start all over again?

The problem with that question is that I wouldn’t start any business. And, no, I wouldn’t get a 9-to-5 job either.

See, the hardest part about starting a company is creating it…or at least that’s the hardest part for me. The easiest part for me is growing a business.

So, if I were to start my entrepreneurial career all over again, here is exactly what I would do.

Step 1: Go on a hunt

I classify businesses in three categories. I know there are many more ways to classify businesses, but for the purpose of this blog post, let’s go with this classification:

  1. Businesses that make little to no money.
  2. Businesses that make a shit ton of money (e.g., Microsoft).
  3. Businesses that aren’t doing as well as they should because of founder or team issues (e.g., a company that is making one million a year when it could be making ten million).

Obviously, I don’t care for businesses in category 1 because they aren’t making money. And I don’t care for category 2 because I can’t afford to buy out those companies.

But the businesses I care for are in category 3.

As I mentioned above, in most cases, those companies aren’t doing well because of management or founder issues. It could be that the founders of the company are stuck in their old ways and don’t understand how to adapt to the times or that they just don’t care.

Either way, if that business was owned and run by me, it could theoretically be making a lot more money.

Step 2: Get down and dirty

Once I figured out all of businesses in category 3 that could be doing well but aren’t, I would want to find out if they were acquirable. I would typically do this by sending them an email to see if they were interested in selling.

Sadly, most of those businesses aren’t acquirable because:

  • The owners or investors don’t want to sell.
  • They want a lot more money than the company is worth.
  • They are emotionally attached to the business.

Keeping those things in mind, I would literally strike up a conversation with anyone interested in selling and, more importantly, with any business that I would enjoy running.

I would hope some of those businesses would get back to me, but if they don’t, I wouldn’t let it phase me. The moment you get emotionally attached to a company, you’ll end up spending more money than you should acquiring it.

Step 3: Get creative

A good portion of the businesses that would reply would be unrealistic with their demands. But a small percentage of the businesses I hit up would be willing to sell with reasonable conditions.

When you acquire a business, you pay a multiple on its profit or revenue. So, if the business was making a profit of one million a year, you’d typically end up paying anywhere from one to four million to acquire it.

The reason for the big range is that depending on the industry, the business may not be worth much, as in the case of a service-oriented company, for example. In other cases, e.g, in the software-as-a-service industry, a business can be worth a lot.

Once I have a list of companies that are interested in selling, I would come up with a creative way to structure the deal because I don’t have millions of dollars laying around.

Some ways to get creative are:

  • Payment plans – if I were acquiring a business for one million dollars, I would try to offer two hundred grand upfront and maybe 1.3 million dollars over the next three years. I know, the total ends up being more than one million dollars at that point, but no one would take a payment plan unless there was an advantage for them.
  • Bank loans – getting a bank to give you a loan is tough. But if I have a home that is almost paid off, I may be able to get a line of credit. I could then use that cash to buy a company.
  • Equity – I could try to buy a company for a fraction of the price and offer the current owner 10%-20% equity in my new business. I would pitch him or her the vision I have and show the owner how he or she would make more money by selling the business to me.
  • Ego boosters – people like selling their companies because they can brag about it to their friends and families. So, not only would I give them that privilege by buying their companies, but I would also offer them fancy titles such as “advisor.” My hope would be to get a reduced price as a result of this flattery.
  • Other people’s money – in the worst case scenario, I could leverage my contacts and convince a few investors to give me money to acquire a company. In exchange, I would give them equity in the business I am buying.

Let’s hope that through one of these methods I’d be able to buy a company. Then, I would focus my efforts on growing the business.

Conclusion

Just because you buy a business doesn’t mean that you’ll be able to grow it. I have bought businesses in the past and lost money. When buying them, make sure you are conservative because issues always come up.

If you had to start all over again, what would you do?

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Comments

  1. This sounds like a good plan and something that I’d eventually like to do… but the problem for me is the jump from where I am now (being an employee and never having owned a business) to buying someone else’s business and successfully running it.

    What’s the step in-between that’s a bit more secure/comforting and carries less risk? How can you first get experience influencing how a business is owned/run? For example, is there some sort of consultancy job/role you can do? Some tips would be greatly appreciated.

    • Kat,

      I had the same question a few years ago. What I decided to do was join a successful but very small company with only 4 employees.

      I figured if I want to be an entrepreneur then I should go work for an entrepreneur to see what it’s all about.

      I worked directly for the owner and it gave me tremendous insight into what it takes to run a business, not to mention I had lots of time to pick his brain on how we got started and grew the business.

      I have since gone on to launch my own business and I have to say, the insights I gained while working of the small company were key to the success that I have had so far.

      If leaving your current employer to go work for someone else is not an option right now, try reaching out to other entrepreneurs for advice. Invite them out to lunch or coffee and ask them if you can interview them on how they started their business.

      If you don’t know any entrepreneurs, try reaching out on social networking sites like LinkedIn. Entrepreneurs are some of the most helpful people you will find because they know how hard it is to get a business started and want to pay it forward by lending a helping hand.

      Of course you can always search the internet too to find helpful resources and information.

      Good luck!

    • I would continue to work at your 9 to 5 job and stack up the cash. Once you have enough money, go out there and try to find a business to buy that doesn’t involve too much work. Maybe a site that makes money selling ebooks.

      As for experience, the best way to get it is to just jump right in. Other than that, all you can do is learn from others.

  2. This actually works for smaller websites (businesses) too. I’m talking $20,000 to $100,000.

    In fact I’m looking to buy few $$$$$ or one $$$$$$ website(s) myself and for the most part I’m following the tips you mentioned here.

    The toughest part for me (as yours) is to find the right business. A goo strategy is to go for one that complements your other websites (businesses). This allows for cheaper marketing and also more profitability with the same capital.

  3. Irma Solakovic :

    well…nobody said it was gonna be easy:P:D
    just kidding, I think people don’t consider how much they will have to give with an aim to get something. I really think it’s not all about the money. Ig you don’t fail sometimes you’ll probably never learn valuable things that will help you in future. For ex. If you hadn’t lost some money, and made some bad choices you wouldn’t make the right choices now, or be able to give some advices. It’s important to find something valuable in every lost. I find all of those advices good, but just in theory, I mean… it’s not that easy to buy a company no matter how ruined it is, or get a loan…or stuff like that. Anyway it’s always good to read something new when it comes from you:D:D

  4. Always clear in hindsight :)

    I believe one of the big things you learn from multiple ventures, etc. is what you are good at/best suited for/enjoy the most vs what you suck at/not suited for/hate the most.

    And usually the only way to REALLY know is to try different things. Sometimes folks are surprised at what they end up liking/hating and hidden talents.

    You never know till you give it a shot :)

  5. Hey Neil…

    Found your blog here through David and Rise to the Top. Great interview, btw.

    I’m in no position to be acquiring companies right now because I made the huge mistake of letting my emotions get tangled up in a Business I just lost. Of course that set me back financial in a big way but doors are opening and I’m in the process of starting my first online business. I launch our membership site on the 18th. I’m working my ass off and I’ve got my fingers crossed.

    Anyway, I’ll definitely be stopping back by to freshen up the old Entrepreneurial Noodle.

  6. Great post Neil….

    One thing that surprised me “So if the business was making a profit of 1 million a year, you’ll typically end up paying anywhere from 1 million to 4 million to acquire it.”

    Did you mean revenue there? Because if your company was making a mil a year in actual profit, why would you sell it for a mil? That would be 100% ROI for the acquirer (not counting any increases in profit they could bring). Thought it’d be more in the 5-10x profit range assuming low risk and no debt.

  7. The company I work for has had offers to buy it out and it is just like you said, the owners won’t sell unless it is for a price that is equal to or more than what the company would make with a 5 year projection.

    The thing that surprised me was how easily people can just call up a company (or email them) and inquire into buying them out. I always assumed the buying and selling of a company involved back alley meetings and insider trading.

  8. You’re absolutely right Neil, but the problem is that buying a business isn’t for entrepreneurs who are just starting out. I think that should be left to those who already have successful companies. I mean for those who have already soiled their hands with two or more successful start-ups.

  9. Buying and running businesses require different skills. Saying that, if you want to evaluate a business, it helps to prepare a checklist and work thru what the target acquisition offers. Buffett talks about this in his first bio, not the Snowball.

    So, when buying consider:

    1. the people – is it their talent you’re after
    2. product
    3. customer base
    4. cashflow

    From the outside you may have an idea how successful the product is, the other three may be less visible and harder to determine.

    and a small warning!

    Smart accountants can bury debt is very sly ways. So, don’t look just at the P&L and cashflow, look at loans, debts etc. This is where many an acquisition goes wrong – you don’t actually know what you’re buying!

    Ivan

  10. Neil, If you haven’t stated this in your conclusion: “I have bought businesses in the past and lost money”, I would have comment on this: ‘The easiest part for me is growing a business’. Anyways, if I have to start, I will make sure not to repeat the mistakes that I’ve learned from my past businesses and will explore more about the new venture.

  11. Great post, Neil. Buying an existing company is a good option that deserves to be discussed a lot more.

  12. How To Increase Sales :

    Nice post Niel,

    I’ve done the start up thing and I found I started to get tired of the who project at the 3 year mark.

    Picking up a business as the founder has lost the motivation and wants to do something else is a great idea.

    Consider using vendor finance as the owner may be open to this finance structuring just to exit quickly.

  13. Adwords Secrets :

    Matt Collins wrote: “Buying an existing company is a good option that deserves to be discussed a lot more”.

    A buddy of mine explained to me that the business and the company can be separated. Let me explain, you buy the business, the name, trade marks, all the IP, inventory and place it into your new company, leaving the old company as a shell.

    This way any potential law suits from the old company do not follow the new business, so you don’t inherit them from the previous owner.

    (Public Listed Companies – its a little more complicated but can be done – it was done recently with GE, they left the debt with the old GE that’s listed, and a new GE without the debt was born, funny thing here is the Gov let the tax credits transfer to the new GE, that’s a bit sneeky – the share holders may loos out on what they did.)

  14. latest gadgets :

    Identifying 3rd category businesses is in itself a challenging task.

  15. Very good advice for buying an existing business. Will surely keep this in mind before buying existing company.

  16. The toughest part for me is to find the right business. A goo strategy is to go for one that complements your other websites (businesses). This allows for cheaper marketing and also more profitability with the same capital.

  17. Great headline, Neil! I thought, “there’s no way that could possibly be true…” I was wrong. Thanks for your advice.

  18. Under the 3rd type of business, I would imagine that the lack of revenue is a result of a team with no vision, so I would want to be very careful that I wasn’t taking over an unmanageable team that is wearing blinders. Otherwise, the risk could be full scale mutiny when you start trying to change things up.

  19. I tried this route once with a few Business Brokers for about a year. Heads up, I’m not sure I would recommend the Business Broker route to anyone. From the year of experience, they just want to sell any business to anyone. Most aren’t even that good at business in general. I’m sure there are good one’s out there, but be very leery. Got burnt out by the whole situation. Maybe doing the process myself is a better route. This post may have given me the motivation to try again.

    Thanks,

    LB

  20. I would buy and sell websites as opposed to creating the sites myself. Like you, I enjoy buying a website that can be optimized better to grow, than to create one from scratch.

  21. Interesting take on the “if I started today” question. I would imagine most people aren’t in the position to shell out a million bucks, so I like how you offered creative solutions to that problem.

  22. I think the important thing for me is to make sure that you are completely passionate and insane about the business that you are starting. There are too many ho-hum business owners out there with no customers to show for it.

    You are your biggest fan. You have to be able to allow that personal enthusiasm leak onto others. That is when you start selling some serious products.

    -Joshua Black
    The Underdog Millionaire

    • That’s such a debate that has been going on for years. Do what will make money, do what you love, or can you do both. There are such great arguments for both.

      If you love something and are passionate about it, but there is no market for it you will be broke. If you don’t love something, but it has great potential you won’t have the motivation to make it work.

      You have to find a happy medium ;) Love your comment and insight.

    • Yep, that’s when you can really go to the next level.

  23. Very interesting article Neil. Actually, when I read the headline about this post I thought it would be more about not having regrets and whatnot… Either way it would have been great. But I really really like the direction you went with this. Got me to really thinking. Anyhoo, thanks for the piece.

    I will read it again. I actually read your post 2-3 times each time because I feel that I might miss a nugget ;)

  24. Juan | Acne No More :

    Interesting approach. But you should know what you’re buying and how hard it will be to grow it.

    ~~Juan~~

  25. I am the guy with the great business, I am the creative end now I need the money end, I have it all a website that performs, a retail store, a shop I race I do rallies I am so niche and unquie I have created my own market for all to copy and some big names have failed because they do not have me and I know the product well everyone copies me to the big guy to the little guy, I need someone who knows the money end, someone help me I know what I doing its just I do not know money,I am not new look at my site

    Michael

  26. Thanks for this perspective Neil. I’m currently in the process of evaluating two offers on my site and also pondering what I will do if I do sell and have to start over. Your point about boosting the sellers ego is interesting to me. I think one of the firms looking to buy my site is using such a tactic. I really appreciate your insight. It is helpful to me as both a seller and a potential future buyer.

  27. Thank you for the post Neil!
    Could you go a bit deeper on your valuation technique?

    Any valuation models you use or get some investment bank to assist you on it? Do you do any due diligence? If so, do you hire someone to do it? Have you studied anything on the topic of business valuation, and how do you prove your price to the seller?

    • I wish I could, but it isn’t a simple answer.

      1. I usually do the diligence myself or I ask for my friends help.
      2. I analyze the financials to make sure their numbers are accurate.
      3. I analyze the business to see what low hanging growth opportunities there are.
      4. I buy businesses that I can get for cheap.
      5. Sometimes I over pay if I think I can make a lot of the business. If I can make 100x off a business, then I will gladly pay 10X revenue instead of 4x if I have to.

  28. Business owners that are old or have poor health are always eager to sell their business at good terms, even if profitable.

    And we’re not talking about an innovative hosting company, I’m talking about restaurants, bars, gas stations, and old school brick ‘n’ mortar stuff that makes good money.

  29. I actually have a friend that brokers business’s. His company buys companies that are in the hole but have good potential. They then go in clean it up a bit and resell it. It is really quite an interesting business.

  30. Starting a New Business in This Economy . . . Are You Crazy?

    As I work on starting up my business, that question sits in the back of my mind, trying to divert me. But I love what I do, and after 26 years, I’m very, very good at it. This is an exciting opportunity. I would guess that many of you can relate.

    • sell textbooks :

      I actually don’t think it is all that bad of an idea. If it wasn’t for a friend of mine, me and four other people would be out of work. If you have the ability to open a business and employ people, you should. The only way to get out of this economy is to fix it ourselves. Obama certainly hasn’t done much to help, so we must help ourselves and others around us if we can.

    • I am big believer that it is a good time. You can find talented people to work with for pennies on the dollar or for free.

  31. If ever I’m given the chance to start all over again. I won’t. I am happy where I am now. Yes, I have committed mistakes and failed in the past but these failures taught me good lessons and I wouldn’t be where I am now if not for these mistakes.

  32. Most of millionaire prefer to buy bankrupt companies, and then they invest to re-build up. I think that is very smart way if you have a cold head of business.

  33. Yeah acquiring ongoing business and building upon it may be a quick start then building it all over again from scratch. I like your idea on focusing the type of business you specified in the post.

  34. neil, you really are a big deal

  35. Though I’m nowhere near owning a business, I see myself having the problem of creating one. The ideas you present are interesting. It would be much simpler to purchase an existing business where you the knowlege to make it grow.
    But I would like to create at least one business so I’d know how the process goes.

  36. Very informational Neil. Thanks a lot.
    This was definitely helpful for those who are looking to start somwehere in the middle of a business lifecycle and grow an existing business. Another good blog will be your views on ‘How to research the feasibility of a business idea’ . I know there are a lot of resources out there but getting your views on it will be great for people like me.
    BTW – I have been lurking around your blog for quite sometime now, but i think this is my first comment. Great work with the blog, keep it up !!

  37. Great idea really Neil. Buying a already established company is really a good profit earning way. With some efforts you can achieve a lot..

  38. Great advice here and I agree with you 100%.

    We actually practice what we preach too and you can buy one of our business licenses on a payment plan, for as little as $2k deposit you can own a business that can make a considerable amount of money and will pay for it’s self, meaning you can pay for the license from proceeds from the business! This is a fantastic offer for entrepreneurs!

  39. I admire those writers who share the best of their knowledge in writing such articles. Keep up the good work and continue inspiring readers.Thank you so much.

  40. Hello Neal , I have a problem, i have start my seo business many time but not able to continue perhaps i didn’t get success till date.
    so how can i focus on that..

    tell me something about this..

  41. I would start a business from the beginning, because when I started I was afraid and waited a few years. Well, this was wrong because I could have earned more money from the beginning. Currently I’m also thinking about making an acquisition, because I have a pretty good budget and would like to invest it. Just like when I began, I’m afraid not to do it wrong and lose my money.

  42. Your perspective is very excellent. Thanks for put on view this valuable information. I have the benefit of stay.

  43. Online Air Ticket Booking :

    This allows for cheapest marketing and more profitability with the same capital.

  44. Starting all over again is very pain-striking and a huge head-ache. But you always have one thing that you didn’t have: Experience. With that you can cover up your mistakes and do it better.

  45. Great post really! I like your idea on focusing the type of business you specified in the post. I think anyone can get success, but he/she has to be focused and try to learn everything for success.

  46. Hi Neil,

    I am one of those in cat 3, and we have been growing continuously since 2008. Some of your ideas have kept me up at night thinking till the sun came up. I can’t say how much we have made in the past two years, but I can tell you that our revenue growth has been about a 1000% increase since our inception. I do wish to grow further and define a more solid base to fall back onto. I have tried helping folks do what I have done, but no one follows through. PEOPLE, YOU NEED TO KEEP MOVING FORWARD, IT DOESN’T HAPPEN OVER NIGHT. Thanks for the brains Neil!

    James
    PremiumCards.net

  47. Hmm.. that makes a lot of sense.. but seriously.. I do not think it is easy at all to guess the financial status of a company.. let alone knowing what issues there are. No one shares that kind of info.. at least not when you are not a big VC.

  48. I was reading Public Speaking for Dummies the other day, and one of the top recommendations when interviewing people was to ask what they would do differently if they could start over. Actually, this was the question the author recommended to ask if you could only ask one question. We didn’t get a chance to ask this to you, Neil, but you went ahead and asked for us. Thanks!

  49. I certainly enjoyed the way you explore your experience and knowledge of the subject! Keep up on it. Thanks for sharing the info.Thanks Neil..

  50. Excellent post Neil. After reading the first sentences I already knew what you will say next about being much better to acquire a business and making it better. This is the easiest way to make money. It takes some time but the rewards are worthy.

  51. Its rough when you think about it, because, for me, through all the struggles, blood, sweat, tears and setbacks – so much has been learned and I would only go on to make other mistakes if I didn’t make these. So much has also been gained, and who knows if I would have ever gotten the fire to get all in without the negative things I experienced. Maybe I wouldn’t be as successful or maybe I’d be making bigger mistakes at a more crucial time in my life (with a family to worry about). Though my setbacks weren’t as big as yours I feel they were necessary…for me.

  52. Well, sounds like a cool strategy though. You’re right with the point Neil. If we just keep on doing the same thing all over again and again and again, then it wouldnt take us anywhere – absolutely nowhere.

  53. i always wanted to have a business but i don’t have the courage to establish one. mainly because i fear that it wouldn’t go well and i would be in debt. so for now my dreams are put on hold until i find the courage to do so.

  54. Brilliant post, thanks for the information!!

  55. I actually jotted down the exact same topic a while ago that I still want to cover on my site.

    The answer to this question will be different from every single person out there. You will usually see the guys that worked themselves to death say, “I wouldn’t do it over again.”

    and the guys that haven’t really been doing much so, “Hell yes, I will do it over again and again and again.”

    A lot of people in the world don’t understand what real hard work is…the are blinded by myths and people stating otherwise.

    Thanks for your outlook in the situation…It’s nice seeing a person that worked hard differ their outcomes in life if they had to do it again from the start.

  56. hey neil,
    Great attempt. i found really interesting the “Step 3: Get creative”. I liked this post.

    Thanks.
    Matt

  57. I have since gone on to launch my own business and I have to say, the insights I gained while working of the small company were key to the success that I have had so far.

  58. I really enjoy your articles. They are never irrelevant. To me anyway. Thanks for another great read. I will think about the 3 categories of businesses and see how I can apply them.

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