Buying a Business With Little or No Capital: A Practical Guide With $0-Down Strategies
Author: Rudy LeCorps
Publisher: RGL Learning
Reviewed by Soroya Brantley
More and more stories are appearing in the press about the U.S. Social Security Administration’s likely default on payments to beneficiaries in the future and about pension plans going bust at some of the country’s biggest companies. No one’s financial future seems secure anymore, especially if you depend solely on money saved or invested in any one kind of financial instrument, such as a 401(k). As a result, Americans increasingly are seeking new ways to supplement their income both at the present time and for future financial security. If you are one of them, perhaps you have considered owning a business but decided that you don’t have the start-up capital needed.
Don’t let that deter you, says Rudy LeCorps, author of Buying a Business With Little or No Capital: A Practical Guide With $0-Down Strategies. In this book, LeCorps offers useful advice and innovative buying strategies for would-be entrepreneurs.
LeCorps starts out by weighing the advantages and disadvantages of purchasing a business versus starting one. He notes that an existing business already has a core clientele and you simply would have to work to expand it. Moreover, the staff often is already in place and trained, which means that you can keep your regular job, with the income and security it provides, since you will not have to micromanage the business.
So what business should you purchase? LeCorps suggests that you research the viability of various industries before becoming involved in any one. An important consideration is whether technological advances could render an industry obsolete. It’s also best to consider an industry with which you are familiar, or at least are interested in, LeCorps advises. The key is to remember that you should be basing your decisions on more than just a gut feeling.
LeCorps suggests seeking out and bidding on businesses in more than one industry because this increases the buyer’s options. He points out that just because you express an interest in buying a business does not guarantee that the sale will take place. It is therefore prudent to have multiple potential deals under consideration. How will you find businesses that are for sale? LeCorps suggests conducting Internet searches, checking newspapers and even asking business owners whether they are thinking of selling. He cautions that this process takes time and patience, so buyers should not be discouraged.
Now that you have done the research and narrowed the possibilities, how do you make your dream a reality with little or no cash in hand? In addition to the money to actually purchase the business, you also will need to find funds for closing costs and working capital. Closing costs cover expenses such as the professional fees of lawyer and others, while working capital is needed to continue the business once you assume ownership. In addition, the staff will have to be paid and utilities and rent may be due. LeCorps describes in detail a number of strategies for addressing your immediate cash flow needs, such as decreasing the down payment amount or negotiating to split the down payment with the seller.
Of course, the issue of cash flow is moot if there is no money to fund the actual acquisition of the business. LeCorps does not dwell on the usual means of acquiring money, such as borrowing from family or friends or persuading them to invest in your vision. Neither does he spend much time on the prospect of a bank or small business loan. Instead, he points to creative options, such as “lease to own,” which, as the name suggests, allows a potential buyer to lease the business for a specified period of time before closing the purchase. LeCorps also cites the Caribbean practice of “sousou” as a means of obtaining needed capital quickly. The practice involves a group of people whose members contribute the same predetermined amount of money each week or each month to form a “hand.” The organizer (“banker”) of the “sousou” collects the “hand” and gives it to a different member each week or month according to the order established by the “banker.” A member of the group may negotiate to switch places if an urgent need arises.
LeCorps speaks from personal experience—an added benefit of the book—since he and his wife own several businesses, including a car rental franchise and a publishing company. He describes his own successes and failures in acquiring these businesses and what he has learned from them. Chances are you will encounter the same challenges.