The American Dream: How do you buy or start a business using none of your own money: PART II

By: Mover

Voiding the biggest myth about buying or starting a business with your own cash

Have you ever said to yourself one time or another " I would give anything if I could have my own business, but I don't have the money." Well, you're in for a huge and shocking surprise. You don't actually need any of your own money- not a penny of it, and the money you do require is readily available from others, often from the most unexpected of sources.

So you can have the American dream-being your own boss and not having to answer to anyone, taking home all the profit-all without putting out one cent of your own money. In this book, I will explain some simple financial techniques most people assume are for individuals such as Donald Trump, Bill Gates, and other famous entrepreneurs. Anyone can use these techniques with simplicity and ease. The Myth has disappeared. Reality is kicking in.

Question: Is the myth of needing money to open a business still applicable?

Answer: As you mentioned, it's only a myth. I know people who have been looking for ways to work around this well-known myth. In this book, I have gathered information, techniques from seminars, and strategies gleaned from many different books on how to start or buy a business by using leverage. This powerful information will enable you to apply the most effective strategy to acquire, start, or take-over any type of business without much effort. By being strong-minded and determined, you should not feel intimidated by the seller and his requirements. You should enter the negotiation with confidence and leave the room a winner.

Question: Where can I find the money to start a company?

Answer: You can often use the assets of the business you are buying to pay for the purchase. I'll describe in detail at least five or six ways you can count on the seller for the money you need to open the business. After that, I'll give you other ways (in report # 6) to get the money if the seller can't fund you the capital, or if you're simply starting a business from scratch. In fact, it could be even more advantageous to use the seller's money for the purpose of buying the business.

Question: Is buying or starting a business really that simple?

Answer: It is simpler that you might think. Sellers are looking desperately nowadays for buyers to acquire their business. With the Internet craze happening in the past decade, many entrepreneurs have been opting for on-line businesses instead of relying on traditional "brick and mortar" ventures. Sellers are getting desperate to exchange ownership and will rely on any buyers' requests. This advantage will enable the buyer to close any deals on their terms. These procedures are simple to apply with the understanding that all transactions are clear and accepted between both parties (buyer and seller) in question.
Think about it: The parties in a business acquisition transaction rarely, if ever, reveal the intimate details of their deal, so you aren't likely to know much about the "no cash" acquisitions that happen every day. With that said, I would estimate that one of every two small businesses is sold or started with absolutely no cash investment from the buyer-yet still satisfies all the seller's objectives.

Question: Is there any good time for me to consider buying a business?

Answer: It is imperative that you think thoroughly before considering the purchase of a business. You should consider your experience and what you enjoy doing. If you are interested in a business that has a product or service that is outside your area of expertise, then you should make certain that key employees will stay on after the change in ownership or that similar expertise can be hired.

It is equally important that you should identify the desired location(s) and the amount needed for the purchase. You should then assess what the realistic
possibilities are of obtaining the funds from outside sources (family and friends). One should also decide on the size of the business in terms of sales, profits, and the number of employees.

It is important to determine if the business you wish to buy is to be one that is profitable and stable or one that is losing money and in need of new management. The more profitable and stable a business, the more it is
likely to cost. In retrospect, a healthier business can be easily presented to potential investors to obtain the desired amount of money (if this option is chosen).

Question: Give me some examples of entrepreneurs who "made it" without any of their own money?

Answer: Here are a few stories of entrepreneurs who have always inspired me and I think they'll do the same for you. (You may even recognize a few...)

Example: Paul Orfalea, a student with below average grades just out of college, started the now-famous Kinko's copy stores without a penny of his own money. It began in 1971 when he convinced a commercial bank there was a big demand among college students for a convenient, multi-purpose photocopy shop. The bank loaned him $5,000 to take over an 80-square-foot hamburger stand for the purpose, and Orfalea went on to build his tiny operation into a $400 million chain of nearly 800 stores throughout America. By studying the market and the needs of the student community, he was able to pull through and follow his dream of being his own boss. Not bad for a small start-up.

Example: Ray Kroc was a 52-year-old milkshake salesman back in 1955 when he convinced brothers Mac and Dick McDonald to sell him their lonely little hamburger stand near Burbank, California. Since Kroc didn't have any money, he worked out a unique and highly leveraged no-cash-down arrangement. On his first day in business, Kroc's cash register rang up close to $400.00. "It rained that day," he later explained. The following week, the sales doubled. Today, McDonalds reaches the 20 billion dollars/year sales mark. Quite impressive isn't it? McDonalds is both the biggest owner of commercial real estate and the biggest food service corporation in America.
Ray Kroc didn't have to spend a penny of his own to start it all.

Example: Tom Monaghan, a 1960 college drop-out, partnered up with his brother and bought a bankrupt pizzeria in Ypsilanti, Michigan, securing a bank loan in order to satisfy his end of the deal. A year into the business, Monaghan bought out his brother and developed a soon-to-become brilliant game plan: open stores near college campuses and military bases and promise delivery in 30 minutes, or the order is free. Domino's Pizza is now an America fixture, taking in annual sales of nearly $1 billion. Monaghan gets to indulge in a rich man fantasy by owning a major league baseball team, the Detroit Tigers. Not bad for a guy who didn't have a spare dime to his name starting out.

Example: Ernest and Julio Gallo knew nothing about winemaking when they started out back in 1933. So what did they do? The brothers studied pamphlets on the subject at the local library! Then, because these future bright entrepreneurs were unable to secure a bank loan for their proposed winery, they arranged to get 90-day credit terms from a maker of crushing and fermenting equipment. And they got their first grapes from local farmers with the promise of paying them once they sold the wine. The Gallos sold their first 6,000 gallons to a Chicago wine distributor, and the rest is history. Gallo is now the largest winemaker in America with annual sales approaching $600 million. And it all started without a penny of their own.

Question: You're right, these are tremendously inspiring stories. But do entrepreneurs today have the same kind of promising opportunities?

Answer: Absolutely. In fact, according to an issue of Inc. Magazine, "the financial system that was accessible to [earlier entrepreneurs]... remains equally accessible today."
We are in an era in which technology is improving at the speed of light. We hear everyday about new entrepreneurs selling their businesses (internet and software companies) to corporate giants for several millions of dollars.
In trying to understand how this kind of acquisition is being done, there are a few questions that come to mind. Under whose terms is the business being sold? Are the buyers actually submitting a check for the amount of the announced purchase price? The answers to these questions are not readily available to the public. It is kept between financial experts and the parties involved in the transaction.

What you need to understand and not be afraid of is the wheeling and dealing of these kinds of acquisitions. They do not happen in the ways portrayed by newspapers and magazines. Be very aware of the information about to be revealed to you.

Let me give you more details on this subject. These new start-up companies in the I.T (Information Technology) industry have something that corporate giants want. A large corporation meets with a newly formed start-up company and proposes a deal to its sellers. The amount revealed in the newspapers is only the market price or potential future revenues of the start-up company. The company can be a sole proprietorship or limited liability corporation . By acquiring the company, the corporation will create a different entity out of the newly acquired start-up and submit an IPO (Initial Public Offer), by which the company enters the world of the stock market.

Second biggest myth about buying or starting a business

Have you ever heard of the concept of leverage? You definitely have. As a matter of fact, you already know how to use it. By using your credit card, you're actually using other people's money to purchase a desired item. You're able to just sign your name to "borrow" for your purchase. So leverage is just a word for the simple idea of using "other people's money". It is no more complicated when you buy a business on leverage. Having adequate limits on your credit card can help you with the down payment on your business venture. Make sure you maintain a good credit rating. If not, hope is still there.

Question: What other secret of starting or buying a business is available to the public?

Answer: Information, my friends, is the secret. The more information you have, the more powerful it will make you. You need no business ownership background or fancy education to start or buy a business without cash of your own. In fact, you might be better off without these typical preconditions, which can discourage you in reaching your goals. Research will help you find out more of these secrets. The information you will accumulate through your research will allow you to open your eyes to new opportunities out there. Where other people see obstacles, you'll see a challenge.

Question: How simple is it to buy a business on 100% leverage?

Answer: It is as simple as A-B-C (under the following conditions):

A: The seller is willing to finance 70 to 100% of the purchase price, a concept that will be explained later.
B: Any remaining amount can usually be financed through the seller's bank. Financing can also be
handled in a different way, with the bank picking up the largest share and the seller contributing the rest.

C: A business broker or a supplier to the business can also be called on to contribute to your no-cash deal. The idea is to build "stair-steps" of financing to reach your goal. It can be advantageous for a broker to get involved in the transaction. Most of the time, the broker represents the seller; however, if you approach him and request a specific business, he may find it for you. At that point, he'll search around to see what business will best suit your interests. He will attempt to close the deal and can give you a temporary break on his commission. That doesn't mean that you are exempt from repaying his hard-earned money. Your broker will give you a time frame in which to pay your dues. Within this time frame, the business will generate enough money to pay for all operating expenses, the first month of the bank loan, and the broker's fee, including the seller's advance on the down payment. This amount can be exonerated from the initial purchase of the business. You're probably wondering when your six-figure salary will appear. Sacrificing income for the next few months will be necessary to get the business running. This applies to start-up Internet companies as well. The Chief Executive Officers are making a mere $200 per week, if they are lucky. However, their goal is to be purchased by a big corporation; and if this scenario happens, their time and effort will be worth their while.
Question: Is the seller going to accept this maneuver?

Answer: Why not? As long as you can make sure that the seller gets what he or she wants, one way or another. Buying a business on no-cash terms doesn't necessarily mean the seller ends up with no cash. It's just not your cash. The key is to know the leveraging possibilities you can bring to the table, and which to suggest for a given situation. You'll discover a number of them in this book, as well as other leveraging techniques available in the program reports. I should point out that it's somewhat easier to buy a business on leverage than to start one from scratch. As I mentioned earlier, you can often use the assets of the company as "other people's money" to arrange a none-of-your-own-cash transaction.

Question: But what if I have a great start-up idea and need to start from scratch?

Answer: lem. Program Report #2 explains more precisely the possibilities offered through start-up procedures. It will offer a step-by-step method to get yourself organized. Organization will be to your advantage. The reports will show you how to approach and win over bankers, prospective suppliers, venture capitalists, and "Angel investors" as sources of funding for your idea. In addition, we can show you how to get started via a limited partnership, selling companies' stock, going through the Small Business Investment Companies (SBIC), and using home equity loans. All of these methods will get you much more money than you could by your own means.
The Small Business Development Center in your area can be a great help to your new start-up. You should contact the SBDC (subsidized by the Small Business Administration) in your area and ask to talk to a business consultant.
They will provide you with additional information about the trends and demographics for where you reside. This can be vital information, especially if you desire to cater to the local residents.

Question: Can you give an example of how I would bring leverage to the bargaining table to buy a business?

Answer: Sure. Let's take the example of our dear friend, Larry. Perhaps like you, he was more than ready to say goodbye to his day job and was extremely interested in going out on his own. His dream was to own a vending machine route, a business he had found stimulating and exciting. He also thought the business had great potential because of the possibility of servicing the student community.

Article Source: Loan Info Center

Dan Amzallag Business consultant/Author/entrepreneur/publisher www.theamericandreambook.org Email: dan@proaceintl.com Phone; 3019477563 Submitted with Article Distributor.

Please Rate this Article

Not yet Rated

Additional Articles From - Home | Business Loan Center | Business Loan

Looking for Business Loan Companies??? - By : muky
How to do Business Loan Brokerage Deal?? - By : muky
How to deal with business loan broker ! - By : muky
What is the importance of Business loan? - By : muky
Business loan and how to acquire it - By : muky
What are the Benefits of Business Loan? - By : muky
The American dream: How to buy/start a business with no money: Part VI - By : Mover
Business Loan Information and it's use - By : muky
Financing Cash Flow Peaks and Valleys - By : Brent Finlay
The American Dream: How do you buy or start a business using none of your own money - By : Mover

Sign Up for a free account
Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Article RSS Feeds

Dominate by writing articles!

Loan Info Center
Informative website for all loan related topics
Car Loan Info Center
Website specializing in car loans and car leases

Add to favorites
Loan Info Blog
Link to Us
Contact Us
Privacy Policy
Terms of Service

LOAN-INFOCENTER.com » Copyright © 2007
Terms of Service | Submission Guidelines | Contact Us | Link to Us| Privacy Policy | About Us