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ZCP

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Best way to learn is to jump in..... ask @Greg R

He has probably learned more in the last week running a business than in the last year talking about business.

Not sure how? Bird dog / find available deals. Then hit up someone on the forum and see if they will mentor you through.

Now, less talk, more deal finding!
 
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SteveO

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Understood. I understand some about evaluation through value investing books. The process is somewhat similar. But I can't help but feel this is pure bean counting. It doesn't take into account "potential" of the business.

I guess the best way is to post a follow along thread when I start my evaluation. See if pp can help me pick it apart.
Best way to learn is to jump in....
!!!!!
 

Dubidu

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I wish I had more information on business evaluation. @JScott could chime in with his expertise if he has time. @biophase has a lot of experience with evaluating online businesses.

For me it is the ability to see where something is at and be able to determine where it can go. Your posts have a couple of great examples.

When I was finding commercial/apartment deals, there was a team in place. They knew our goals were to fix, increase rents, improve tenant base, SELL and move on. I had two full time rehabbers and two office managers that understood the businesses. I had a part time accountant that aided the office managers.

None of these participants in my business saw the financials that I worked with. I kept information on numbers regarding purchase and sale to myself. They kept all the operational numbers.

As a team we would assess the product that I would find. I understood that business to the point that usually a visual inspection of rents, renters, location, and condition would give me everything that I needed to put together a plan and determine what the property was worth to me. There was a due diligence process applied. I cared very little about the present and very much about the future.

I did not always finish the rehabs or re-tenanting. Frequently, the buyers could see what I started and feel that they could finish. I left a little meat on the bone so the buyer could make some money as well. But, I took plenty of profit.

The plans for apartments were always similar. I had a blueprint, location, and general plan for each place.

Really valuable info SteveO; appreciate you taking the time to set all this out. Thank you.
 
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Dubidu

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Best way to learn is to jump in..... ask @Greg R

He has probably learned more in the last week running a business than in the last year talking about business.

Not sure how? Bird dog / find available deals. Then hit up someone on the forum and see if they will mentor you through.

Now, less talk, more deal finding!

On it ZCP :) One question though: I'm a Brit and I don't understand the vernacular "Bird dog"? What does it mean??
 

SteveO

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That sounds a bit more "obvious" in a way - you realised you had land at the back of your existing business that could be up for grabs and found a solution to make use of that. I suppose my thread is more how one would go about acquiring a business/stake in a business where there doesn't seem to be existing knowledge:
Opportunity is OPPORTUNITY. You see what others have not. You implement something that others have not. It does NOT matter whether it is obvious or not. This business and land was purchased based on the existing operations. The fact that @Gary saw that there was more opportunity was the key!
 

Dubidu

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Most of my business investments are passive investments (angel investment where I'm not actively engaged in the business). So, I'm definitely not an expert on buying businesses. That said, ultimately, the value of a business boils down to its NOI (net operating income). You increase NOI by increasing revenue and/or decreasing expenses.

Increasing revenue is pretty straightforward -- you sell more product (improved marketing, sales, distribution). Decreasing expenses is more nuanced -- you can reduce COGS (cost of goods sold) or improve management to reduce operational expenses.

A typical business will be valued at between 3 and 10 times NOI, depending on the industry, the maturity of the business, the growth potential, etc. So, for every dollar you can increase NOI, you can increase the value of the business by $3 to $10. That's where your money is made by purchasing and overhauling a business.

That's the three paragraph overview...happy to answer questions (if I can), but to go into all the details would require several books... :)

Thank you! I don't think I'm at the angel investing stage - my idea (the one I'm working on myself) is to improve a core product used by pretty much everyone! The potential is huge and provided I can get it done and no-one else comes to market first (which is what happened with my initial idea) I should be in the Fast Lane/home and dry.

However, having worked with a number of clients I just found a common theme that I simply hadn't considered: that of being in the slow lane (i.e. having a job already) but investing in a business you know has potential which increases your wealth exponentially and moves you by default almost to the Fast Lane. I wanted to explore that with others on this thread. The difficulty I have noted is that with clients it's not always appropriate to ask dumb questions like: how did you identify the business in the first place? Here I'm hoping no-one is judging me too harshly for the same question... :)
 
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ZCP

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I used Google and found this....
A real estate investing term that refers to someone who spends their time trying to locate properties with substantial investment potential. Usually, the intent is to find properties that are distressed and selling at a discount that can be repaired or remodeled and sold for a sizable profit.

What deals or business opportunities have you found since my last post?
 

SteveO

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I used Google and found this....
A real estate investing term that refers to someone who spends their time trying to locate properties with substantial investment potential. Usually, the intent is to find properties that are distressed and selling at a discount that can be repaired or remodeled and sold for a sizable profit.

What deals or business opportunities have you found since my last post?

Many real estate investors employ bird dogs to locate properties for them. In the single family home market, it is a very tedious task. Bird dogs do this for a fee as they don't typically have the funds to take down the deal.
 

Dubidu

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I used Google and found this....
A real estate investing term that refers to someone who spends their time trying to locate properties with substantial investment potential. Usually, the intent is to find properties that are distressed and selling at a discount that can be repaired or remodeled and sold for a sizable profit.

What deals or business opportunities have you found since my last post?

Ah - OK. We have the equivalent here but their fees for sourcing properties eat into any eventual profit margin. Since our last discussion I have found two businesses of interest:

1. One is a cloud based (so technically it is a technology based venture - see my reservations below) but the fundamentals are sound. The original company couldn't make it work (I have to dig deeper as to why operationally it went into 'distressed' mode) before seeing if I can make it work.

2. Another undervalued (Buffett style) rather than distressed. If e.g. for illustration: I invest $1 now I'm pretty sure it will be worth $3 guaranteed minimum shortly given its sector (and it's not tech as that tends to suffer from hyper-valuation in my view; I don't understand the revenue model of e.g. Instagram etc. other than it is a influencer aka advertiser model). The $1 has potential to be worth $6 rather than $3 so the upside will be worth it.

I'm definitely not a "hypothesise on the Forum and not take any action" type; I'm consistently taking action and applying principles learnt (to all areas of my life) but I don't assume I know *everything* and love the Forum to sense-check and hopefully contribute value and learn from some masters! The one thing I have recognised is that I don't have a circle of excellence yet (my friends don't have the mind-set I do) so the Forum is turning into one for me! Thank you for taking the time to reply; it's been really valuable for me already in the short time since I've joined :)
 
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Dubidu

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Given that, I think you should liquidate everything you own, borrow as much as you can, and invest every single penny...

You don't get 3x GUARANTEED minimums very often!

Ha :) - I've been looking at this company for a while. I think its undervalued and the sector is one I understand unlike say tech where I don't understand the hyper-valuation based on what seems to be no-revenue model. The output of this co. affects/used by a large part of the population. They have a solid pedigree of management and it wouldn't surprise me if they IPO in a few years. I wouldn't bet the farm on it nor can I invest enough to guarantee millions in return like my initial example in the thread did but all the metrics check out - worth the risk in other words...
 

Cruze

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AWESOME thread, really interesting! Thanks very much to @SteveO for his interesting posts.

Fix, add value & flipp the business again is a great "fastlane strategy" and a very much hedgefonds & investment and private equity companys do this (for example "AURELIUS from germany").

I like this strategy but you need a lot of money to buy a disstressed company.
 

SteveO

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I like this strategy but you need a lot of money to buy a disstressed company.
This is true. But there are options here as well.

If you have a track record, you can likely get money from investors. More opportunities come up during downturns. People can get pretty motivated when they are worried about losing their businesses. Seller financing comes into play.

The strategy that I really like is to do whatever it takes to put money together. The original poster here has earning potential and is likely a good candidate for what she is trying to do.
 
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Get Right

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So, I happen to be buying another business right now. You know how it came to be? I heard (from a friend) that the owner was b!tching about it. He didn't like the hours and the low income. What he doesn't see is that his customer service is atrocious....the worst I have ever seen in a functioning business.

And that's where I come in. I "see" the problem. So I made him an offer. An offer that would allow him to avoid those hours and low income to pursue whatever he wants....because I know there is a deal there.

Money - I don't want to take any of my money away from my fastlane business to buy this thing. I don't want to mess with banks either. So I asked for seller financing with an attractive interest rate that will give the owner "mailbox money". He wanted a downpayment. So I called a friend that likes this industry. Told him I have a deal and he knows my track record. He agreed to put up the downpayment for a small percentage. No money from me is involved at this point.

Experience - I don't have any in this business but guess what? I have a friend that is a genius at this...and he is temporarily out of work. Deal made...now I don't have to run the day-to-day.

Growth - I called another friend who works in another industry. I asked him what he thought about adding his specialty to this existing business. He loved it, and it will triple the income. I gave him a small share also.

Exit plan - When I get this business fixed, the friends listed above will "see" the value. I fully expect them to buy me out at that point.

So I am buying a business with no money or industry experience. All because I "saw" something nobody else did. Once you get the mindset right you can see these things pretty easily.
 

jon.a

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Featured post!

So, I happen to be buying another business right now. You know how it came to be? I heard (from a friend) that the owner was b!tching about it. He didn't like the hours and the low income. What he doesn't see is that his customer service is atrocious....the worst I have ever seen in a functioning business.

And that's where I come in. I "see" the problem. So I made him an offer. An offer that would allow him to avoid those hours and low income to pursue whatever he wants....because I know there is a deal there.

Money - I don't want to take any of my money away from my fastlane business to buy this thing. I don't want to mess with banks either. So I asked for seller financing with an attractive interest rate that will give the owner "mailbox money". He wanted a downpayment. So I called a friend that likes this industry. Told him I have a deal and he knows my track record. He agreed to put up the downpayment for a small percentage. No money from me is involved at this point.

Experience - I don't have any in this business but guess what? I have a friend that is a genius at this...and he is temporarily out of work. Deal made...now I don't have to run the day-to-day.

Growth - I called another friend who works in another industry. I asked him what he thought about adding his specialty to this existing business. He loved it, and it will triple the income. I gave him a small share also.

Exit plan - When I get this business fixed, the friends listed above will "see" the value. I fully expect them to buy me out at that point.

So I am buying a business with no money or industry experience. All because I "saw" something nobody else did. Once you get the mindset right you can see these things pretty easily.
 

Get Right

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Congrats @Get Right ! Nice to read. Are your own active in the daily business?
I expect to spend a decent amount of effort for the first year or so but not at the detriment of my fastlane business. I would estimate 30 hours/week on my fastlane and 20 hours/week on the new project. I happen to enjoy my business(s) so it's not really like working.
 

Dubidu

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This is true. But there are options here as well.

If you have a track record, you can likely get money from investors. More opportunities come up during downturns. People can get pretty motivated when they are worried about losing their businesses. Seller financing comes into play.

The strategy that I really like is to do whatever it takes to put money together. The original poster here has earning potential and is likely a good candidate for what she is trying to do.

Wow thank you so much SteveO - I'm having a crappy day and checked in to see such a lovely post; to see that you think I have earning potential and I'm likely a good candidate for what I'm trying to do :) You have no idea how much that means to me...
 

Dubidu

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So, I happen to be buying another business right now. You know how it came to be? I heard (from a friend) that the owner was b!tching about it. He didn't like the hours and the low income. What he doesn't see is that his customer service is atrocious....the worst I have ever seen in a functioning business.

And that's where I come in. I "see" the problem. So I made him an offer. An offer that would allow him to avoid those hours and low income to pursue whatever he wants....because I know there is a deal there.

Money - I don't want to take any of my money away from my fastlane business to buy this thing. I don't want to mess with banks either. So I asked for seller financing with an attractive interest rate that will give the owner "mailbox money". He wanted a downpayment. So I called a friend that likes this industry. Told him I have a deal and he knows my track record. He agreed to put up the downpayment for a small percentage. No money from me is involved at this point.

Experience - I don't have any in this business but guess what? I have a friend that is a genius at this...and he is temporarily out of work. Deal made...now I don't have to run the day-to-day.

Growth - I called another friend who works in another industry. I asked him what he thought about adding his specialty to this existing business. He loved it, and it will triple the income. I gave him a small share also.

Exit plan - When I get this business fixed, the friends listed above will "see" the value. I fully expect them to buy me out at that point.

So I am buying a business with no money or industry experience. All because I "saw" something nobody else did. Once you get the mindset right you can see these things pretty easily.

So helpful; thank you. This is exactly what I want to do and vendor loan is something I'm aware of (it's not applicable to the two businesses I've identified so far - when I refer to the "two businesses" I mean those pertinent to this thread, rather than my own, separate, idea that I'm working on). However, what your post really got me thinking about was the 'circle of excellence' that you appear to have around you. None of my friends are entrepreneurs. They are mostly female and married with babies/stay at home moms (nothing wrong with that whatsoever). The guys that I am friends with are lawyers, bankers etc. This is helpful in that on my own idea I've been able to call in discounted rates on things like NDAs/trademarks/patents etc. but no one I know would really invest in anything beyond a fund their banker recommends - they are risk-averse. I know the entrepreneur road is a lonely one but sometimes I wish I had someone to just bounce ideas off or friends that are of my mind-set that want to strategise/be willing to take a risk/co-invest etc. To address this I've joined an entrepreneur's club and of course this forum which has been invaluable even in the time since I joined but it would be great to find out how to increase my network in the entrepreneur arena. Any thoughts always welcome :)
 
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Cruze

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To address this I've joined an entrepreneur's club and of course this forum which has been invaluable even in the time since I joined but it would be great to find out how to increase my network in the entrepreneur arena. Any thoughts always welcome :)

Hehe yes, thats very difficult. I´ve got a few friends overall in germany, but they are far away and we can only write via fb, email or call. In my near location I found a very nice contact through this forum to an other fastlaner (best regards to @FineDay :D ) that is very helpful for a personal exchange!

Maybe you find people like you in local entpreneur facebook groups ?
 

Get Right

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it would be great to find out how to increase my network
I joined multiple non-profits to grow my network. It's also a great way to give back to your community.
 

NanoDrake

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Given that, I think you should liquidate everything you own, borrow as much as you can, and invest every single penny...

You don't get 3x GUARANTEED minimums very often!

WORD.
If anybody could point me to a 3X "GUARANTEED" return, I would sell even my underwear
 
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