After half a century of buying businesses, people still ask me why I spend so much of my time investing in buying businesses instead of real estate, the stock market and other things like that.
And I always tell them -- and this is absolutely true -- the reason I don't do anything but buy businesses is because, in 50 years of doing so, I still have yet to come across a better investment than buying a business. In fact, nothing else even comes close in terms of both return on investment and risk.
Lets put it this way. If you get any financing at all, the cap rate on the average business with some financing is about 60 percent. What I mean by "cap rate" is youre getting 60 percent of your money back every year.
So, if you invest $100,000, youre going to get $60,000 back a year. I mean, on real estate you invest a $100,000 and youre going to get 10,000 back -- if that. So, buying a business gets you six times what you normally get with real estate and blows it right out of the water as an investment.
But its actually more than that because the amount you normally invest (if you use investor financing) is as close as you can get to zero in most cases.
And while it's true you need to have an attorney and a CPA help you through the whole process, if you understand what to say to them, theyll "ride along" with you, not billing you until after you actually buy a business -- so you can pay them with money from the business you bought, and not your own money. You may also have expenses for traveling to different cities, too, if you choose to go long distance. But even with that, you just make sure you tell your investors that at the close of escrow, you're pulling back all the money you invested. Which they will almost never complain or care about.
Again, I have yet to see anything else that even comes close to buying a business as far as return on investment and risk go. |
