A Business Opportunity Lead That
Builds Rapid Wealth
By Martin Thomson
Small Businesses are an excellent investment that typically yield 100%
to 500% returns. As Hayden Advocates in "The Million Dollar Mentor" small
business is not a place to seek fortune. His opinion is that the self employment
avenue is a fallacy. Something people with no plan or concept of earning
a million dollars in a specified number of months will do in a vain attempt
to buy themselves a job. (Well he is a hard realist) Its a mistake to see
it as the way to financial independence UNLESS it proves to be VERY lucrative
and just not worth selling.
Very few small businesses qualify for this decision. So the lead here
is not to get involved in the first place. The lead is to buy and sell
these entities. As there definitely IS a fortune to be made trading these
assets.
Amazingly there is a steady stream of buyers of these hard work-small
return endeavours. People buy for their own reasons and its not up to us
to question their reasons. As opportunity investors we work to provide
people with what they seek at prices they are willing to pay. (For the
businesses you have built for little money and time or the businesses you
have quickly turned around and resold)
Most people would like to be self employed for two reasons. They would
like to tell their boss goodbye. The other reason is usually found in some
vague notion of a payday in some future undefined time. Hayden talks about
this in the "Mentor" and discusses how self employed people simply buy
themselves the "benefit" of "management headaches" for little recompense.
There are two compounding avenues to take with small business.
Small business investment is very lucrative because like Residential
Real Estate, many of the sellers are non-professionals. They may have basic
business skills but don't understand the value of their proposition which
leads to deals for below intrinsic value. They typically sell their businesses
for 70 cents of $1 of value or they tend to pay $1 for 70 cents of intrinsic
value when buying existing small businesses. This is their individual choice
and the target of our activities.
Many of these business operators are cash flow investors who mistakenly
include their own labour as part of the cash flow equation. Understand?
A cash flow investor will look at a business that returns $50,000 net profit
(after costs of doing business) and will be willing to pay $100,000 for
it because they reason they will have their money back in two years. On
the surface, this may sound reasonable. After all as an opportunity investor
that's 50% profit per year.
But.
When you include the cost of your own time and labour into the equation,
you really aren't doing that great at all. But what they really fail to
grasp is that the asking price is arbitrary and based on earnings, this
$100,000 was fictitious until the buyer makes it real.
So the two leads are
1/ start-ups
2/ converting low priced assets into high priced assets.
1)Start ups.
When you find a demand in any particular area, you recognise that you
have a potential business. If existing supply fails to meet that demand
adequately, you stand to compound your seed capital dramatically. This
is where you will find those rare beasts, businesses that you shouldn't
sell for a quick return because they are just so lucrative. An example
of a current demand that is not being met is in the after market automotive
industry. The area is booming as people tend to modify their vehicles to
their own requirements. The existing supply (businesses that cater to this
need) is not keeping up.
This particular segment is very interesting, it has been booming for
years and shows no signs of softening. The phenomenon is being witnessed
right around the world. The automotive revolution is spanning the globe
and continues at an exponential rate.
Aftermarket sales is just being ignored by big players who are focusing
on larger meatier segments of the general automotive industry.
There is a defined opportunity here for the opportunity investor that
may last decades and beyond. Start businesses in the after market automotive
industry and sell them 2 at a time.
In particular, what is interesting is the automotive tint industry which
seems to be very lucrative and in high demand. Truly a winning combination.
Its lucrative because the cost of tint film is a few cents, but the cost
of the service is hundreds of dollars per car.
Explanations of the demand can be found in the current alarm about global
warming and the green house affect. The damage the sun does to exposed
skin and retinas is very motivating for many people who are willing to
shell out for the protection tint film provides for their family.
Because of the cheapness of the tint film, there is an opportunity to
start up with little money exposed. There is some other things you may
need but the cost could be very low if you approached it right.
2)Converting low cost assets into high value assets.
This is the traditional "re-hab" approach. Just like in Real estate
you can buy cheap and sell high, just by buying small businesses in distress
which have "obviously repairable problems". This is where the vision is.
As a professional you apply your knowledge of the specific area you pick
and review businesses for sale in that area. You identify the profit and
devise the way to extract that profit. Of course, here you will need access
to funds, whether borrowed or saved.
As a small business entrepreneur, your only interest in them is to resell
them rapidly for a profit. This is where the capital gains is, this is
where the rapid wealth is.
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