Have you ever been excited to start a new project, only to have it blow up in your face?
That's exactly what happened to me when I purchased a storm shelter manufacturing company fresh out of college. I thought I had it all figured out, but quickly learned that running a business is no walk in the park.
The excitement of buying a business can be intoxicating. You have the opportunity to be your own boss, put your knowledge and skills to work, and hopefully make a lot of money.
But as I found out, reality can be a harsh mistress.
The Reality of Running a Business
The first few months into running my first acquisition, things were looking good. We manufactured storm shelters and tornado season was approaching. Sales were skyrocketing. As a result, we tripled our staff to keep up with production and it seemed like we were on the path to success. But then the problems started.
Employee theft, customer issues, vendor issues, and a workers comp audit of the past owners all took a toll on the business. We weren't prepared for these issues and started to lose real money. When tornado season ended, our sales slowed and we started to burn through cash.
We were in deep trouble.
We had no more money to keep the business afloat and didn't see a way out. We received a call from the bank and our loan was called and our assets were auctioned off, but it didn't even make a dent in our debt. My partners were forced to file bankruptcy, while I pressed on, searching for ways to deal with all the debt.
It was a costly lesson for me. I spent over $300,000 to settle with banks and vendors and to fight off lawsuits.
I learned the hard way that buying a business without knowing what problems to anticipate can be a disastrous mistake.
What can you do to avoid making the same mistake I did?
- Do your due diligence. Take the time to research the industry and the specific business you're interested in. Talk to current and former employees, customers, and vendors to get a sense of the challenges you may face.
- Have a plan in place to address potential issues. Know how you will handle employee theft, customer complaints, and vendor disputes. Have a strategy for dealing with legal issues and unforeseen expenses. You must also understand how you'll ensure that the plan gets implemented.
- Don't be afraid to walk away if things aren't lining up. As exciting as it can be to start a new venture, sometimes the best decision is to cut your losses and move on.
My story is a cautionary tale, but it doesn't mean you shouldn't consider buying a business. In fact, it can be a great way to grow your wealth and achieve financial independence. But as with any investment, it's important to be informed and prepared.
If you're interested in learning more about how to buy and grow businesses, I highly recommend checking out Deal Camp. We offer a comprehensive course on how to buy and run businesses, and have a proven track record of success. Remember, the key to success is to be prepared and to have a plan in place to handle potential challenges. With the right approach, you can achieve your dreams of financial freedom and entrepreneurial success.