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That’s true but the failure rate of new businesses is over 90%.

True, but my failure rate of purchased businesses is 100% 😂

I bought a company called Ellion in 2008 which was a software development company and PR marketing agency.

It turned out the guys that ran each side of the business hated each other. I couldn't fix it, so I got rid of the software guy and took over that role myself.

It turned out the PR guy got bored as soon as he didn't have anybody to fight so that side of the business declined at rapid pace as well as my side as I was trying to take over personal relationship based contracts.

I ended up selling it to the former co-founder who had also left due to personal conflict.

Due diligence doesn't tell you about human relationships 😂

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Discussion

2Pac 1y ago

Thank you for sharing there are some good lessons in there.

I read a book called buy then build and it talks about the opportunities of buying existing businesses because the boomer generation is retiring and they own the most businesses so there is potentially a huge opportunity. But you are right there are risks with it as well and the relationship based part is an excellent point.

mike 1y ago

I don't know what country you are in, so I have to use UK based frame work, but some tips for buying businesses.

Don't be afraid to buy a company making losses, they can be offset at a later date against profits you will hopefully make.

In the UK, we have a system called pre-pack, it is a method of buying the assets, but not the liabilities of a failed company, this can be very useful and a very economical way of acquiring a company.

https://www.begbies-traynorgroup.com/pre-pack-administration

Up till Covid, I was a tech investor and owned an incubator which invested in over 300 private companies and I have invested in a further 26 public companies.

I decided a long time ago to blog about my life as an investor to give founders an understanding of investors. This blog still exists and you are welcome to read the articles on my website (scroll past the Bitcoin book bit). Also, you'll see my evolution as a Bitcoiner, again feel free to ignore those articles.

https://mikehardcastle.com/

2Pac 1y ago

Thanks Mike. I will look through when I have some free time

2Pac 1y ago

Hope the failure didn’t cost you too dearly

mike 1y ago

Not too much for the line I'm in.

It gave me a lot of experience in failure though which is very useful and worth every penny I lost.