Acquiring a business for free (with no money down)

[Clinton]

I assist business owners sell their businesses and I have a few nice businesses on my books looking for a new home. Typically a buyer would put up most of the price and the seller defers some of it (which is dependent on future performance of the business).

Just had an email from a plonker who wants to buy a business. But he wants to do it with no down payment i.e. the entire price needs to be seller financed.

Apparently, he's just come back from a course where they taught him how he can acquire businesses for free and make a lot of money. They gave him some nonsense about LBO (leveraged buy outs) and he's convinced that small businesses sell with no money up front.

After selling several of my own businesses and helping countless others sell their businesses, I can reveal that the average small business owner is not an idiot who'll hand over a profit making concern in exchange for a promise of a chunk of future profit.

Bottom line: There are many of these courses around claiming to teach never-before-revealed secrets on how to make a lot of money from acquiring a business with no down payment. Don't buy that nonsense, don't pay for the course.You'll be disappointed when you return to Earth.

And if you happen to be selling a business, don't even waste your time sending these clowns your non-disclosure agreement. Demand proof of funding before entering into any discussions.

 

[john1989]

I'm confused.

Is this a warning or an advert?

 

[Clinton]

You seem to be easily confused, John However you choose to take it makes little difference to me.

But following that email, I've just had another conversation (within the last hour) via PM here on UKBF with someone who posted about looking for a business to buy and it turns out that this person may also be a student of the same course and is looking to get ownership of a business for free.

Amazing! I'm packing up for the day, don't want to hang around for bus #3.

 

[S Goodman]

I'm confused also, are you posting this as a warning, a example of a scam or a genuine heads up that many struggling business may "sell up" for free, to relieve themselves from the stress and grief, which is a common practice.

Very many small businesses give their business away, its not unusual for people to seek these businesses out.

 

[Mr A P Davies]

Google it. Something like "get a small business for free"
There is pages and pages of it.
I read a couple, even the British ones mention getting an "attorney", which I tend to associate with the American legal system, rather than the British one.
Looks like click bait for business blogs to me. Someone somewhere, maybe in the USA, managed it, wrote about it, and now it's been been copied and pasted to a hundred websites.

I can well see how it could be do able.
The way I view it, it would be better suited to someone who is well financed, rather than someone who is broke.
More speculative, helping the current owner out of a hole, with the chance of having a good return.
Sounds a bit like some folks have got hold of the wrong end of the stick.

 

[Clinton]

Google it. Something like "get a small business for free"
There is pages and pages of it.
I read a couple, even the British ones mention getting an "attorney", which I tend to associate with the American legal system, rather than the British one.
Looks like click bait for business blogs to me.

Part of it is click bait for blogs. But there's a bigger prize at stake - teaching people "how to acquire businesses for free" (and charging them large sums for these courses).

It's a sophisticated way of tapping into basic human greed. Over the years there have been all kinds of MMO merchants - people with ebooks, videos, courses - promising to teach you how to make millions online. This is just a variation of that.

There will always be suckers willing to pay good money to learn how they can make easy millions. Acquire a business for free is just one of the many scams in the "make money" industry.

But what I'm surprised about is that punters are paying thousands for these courses.

Very many small businesses give their business away, its not unusual for people to seek these businesses out.

There are businesses that are close to insolvent. Others are one-man bands where the "business" generates just enough income for one person.

These are not the businesses these punters are after. They've been promised they'll be taught how to get ownership of quality, established, profit making businesses with complete management teams (i.e. hands off and no full-time owner involvement necessary). Also, it's the £500K - £5 million turnover that they're targeting and that they believe they can take ownership of (without any cash component to the purchase).

 

[MidlandFoodService]

I think Clinton is just sharing something which he experienced recently, not a warning or advertisement. I wasn't confused by this, not sure why anybody would be.This is a discussion forum after all, and this was business related.

 

[Gecko001]

I suppose buying a business is like any other transaction as there has to be something in it for both the buyer and the vendor. If someone is selling the business for nothing only a share in the profits that seems OKish on the face of it. But what is the buyer bringing to the table? It is not money. All it is, is promises. That just does not stack up, what buyer will give his business away for promises. The only thing that the buyer is bringing is his/her gullibility as far as I can see and off course a signature on a contract where someone will be making a profit and it will not be the buyer or the vendor.

 

[Clinton]

That just does not stack up, what (vendor) will give his business away for promises.

Apparently, there are hordes of business owners who'll give up their businesses for nothing.

The trick, it is claimed, is to go in stating you've got some funds and need part of the price to be deferred. You then play a variety of psychological and tactical games to get the vendor to keep making concessions on the upfront cash component.

The courses, apparently, teach you how to play these games to eventually land the business without having to shell out any cash.

 

[Clinton]

Oh yes, and if there's still some small component of the price that the seller refuses to finance you can raise that finance by using the business' assets as security for a loan elsewhere.

It does sound very credible (but what they don't tell you is that there are laws against using the assets of the business to finance the purchase!)

What I've been discovering over the last couple of days is that some business owners have indeed fallen for the "scam" and given their businesses away for nothing more than some vague promises!

 

[Deleted member 59730]

Wasn't this how Al-Fayed bought Harrods?

 

[Clinton]

Good point. And Rover was sold for £10.

With large businesses it works differently. The headline price never reflects the liabilities the buyers have taken on, including putting up hundreds of millions of pounds in guarantees via bonds / shares / property they lodge as security. Banks don't roll over covenants without extracting huge protections for their interests. And considerations like preventing a mass job loss brings politicians and state funding into the equation as well (notwithstanding certain EU restrictions on subsidies).

 

[APW]

Strange thing is clinton, on your website thats the service you offer...purchase business and pay the seller double the worth from its profits.....or am I wrong?

 

[beasty]

This is an odd thread

A thread where the OP bad mouths exactly the thing he does

Odd

 

[Clinton]

...am I wrong?

Yes, you are.

My signature links not to what I do, but to an article I wrote advising sellers to not get caught out like the scams mentioned on this page i.e. don't be fooled by the headline price .... ask when the money will be paid.

What I do is explained in the OP.

 

[GraemeL]

My signature links not to what I do, but to an article I wrote advising sellers to not get caught out like the scams mentioned on this page i.e. don't be fooled by the headline price .... ask when the money will be paid..

Fully understand what you are trying to do with your sig link. But not sure it is helping you, as many people (as proven above) do not trouble themselves to read the full story or get the facts before shouting! It may put off genuine enquiries.

 

[Clinton]

LOL, I hear what you're saying.

The signature wasn't designed for this thread. I've been using it for a while, and it's designed to attract the type of small business owners most susceptible to the "headline price bait" and for whom the article would be (IMO) relevant and useful.

But hopefully we can get past the occasional half-cocked comment. It would be, er, odd (to borrow an expression from above) to expect everyone to follow the OP's signature link before commenting on the OP's thread. And not knowing enough has never stopped people commenting in forums

 

[Talay]

This is an odd thread

A thread where the OP bad mouths exactly the thing he does

Odd

Hardly, it is a thread opened for the very purpose of highlighting what the OP does rather than the supposed agenda item masquerading as news.

Post, then Q&A to every post, each with signature and opportunity to advertise.

 

[Clinton]

Thanks for another opportunity to drop my signature.

One cannot have too many signature links from the same page. It's the latest SEO secret.

I start a thread to genuinely share some knowledge gained from my experience in my industry - and to warn the public about a scam - and you call it out as being an ad.

But when I do advertise blatantly in a thread, with multiple links to my sites and even Calls To Action, you praise me for talking sense!

It's a funny ol' world, ain't it?

 

[Talay]

Many a forum has gone to the dogs through lack of interest due to over promotion amongst a few individuals. This one is dying a death,

 

[Clinton]

Maybe the problem is the few people who whine in thread after thread complaining about promotion instead of contributing something useful.

I try to do the latter and, yes, sometimes it involves disclosing what I do for a living to give the post context. You may call it advertising. I see it as an opportunity to share knowledge that reaches a wider audience of readers (My clients are mainly larger businesses and UKBF isn't the ideal route to reaching them. Almost every major UK business publication - including UKBF's sister sites BusinessZone and AccountingWeb - publish my articles on the subjects of valuing / buying / selling businesses. I reach my target audience - strategy directors, CFOs and the like - through those articles.)

BTW, you claimed to have some knowledge/information about something in this threadas you've often done on the subject of business brokers. You seem to consider yourself a bit of an expert. But when requested to share it you disappeared. Wouldn't contributing in threads like those be of more use than moaning at those who are trying to contribute?

And do you have any thoughts about the OP and courses claiming to teach punters how to buy businesses with zero capital up front? Do you have any examples of small businesses that have sold without a down payment? Do you disagree that this is a scam? (Disagreement is fine, this is a forum after all)

 

[Clinton]

Since I started this thread a few months ago I've seen more business owners affected by these shysters and so I've put together some tips on how to tell fake buyers from real buyers. The article is here. Some of the content is hidden from general view - we don't want to give too much away to the con artists playing this game - but PM me if you want a copy and I'll send it over.

 

[garyk]

I think its genuinely useful content @Clinton so thanks for sharing.

I don't think its anything new though, my old solicitor worked for a law firm many years ago that was purchased by two brothers who 'deferred' payment when purchasing the business. Then there were all sorts of battles to get the balance of the cash out of them afterwards!

P.S. Got any businesses I can buy for free?

 

[Clinton]

Yes, when you defer payment you might never see that payment! There are many ways to screw you out of it.

Deferred payments are not uncommon. In fact, most deals have some small element of deferred payment. The difference here - with all these courses and ebooks that have sprung up - is that they are claiming to teach "buyers" how to pretend to be funded but then twist the deal around so it's 100% deferrred payment.

The more manipulative and shifty the buyer the less the chance of seeing your money.