The American Dream

How to buy or start a business using none of your money

Strategy 1

Voiding the biggest myth about buying or starting a business with your own cash

Have you ever said to yourself one time or another " I would give anything if I could have my own business, but I don't have the money." Well, you're in for a huge and shocking surprise. You don't actually need any of your own money- not a penny of it, and the money you do require is readily available from others, often from the most unexpected of sources.

So you can have the American dream--being your own boss and not having to answer to anyone, taking home all the profit--all without putting out one cent of your own money. In this book, I will explain some simple financial techniques most people assume are for individuals such as Donald Trump, Bill Gates, and other famous entrepreneurs. Anyone can use these techniques with simplicity and ease. The Myth has disappeared. Reality is kicking in.

Question: Is the myth of needing money to open a business still applicable?

Answer: As you mentioned, it's only a myth. I know people who have been looking for ways to work around this well-known myth. In this book, I have gathered information, techniques from seminars, and strategies gleaned from many different books on how to start or buy a business by using leverage. This powerful information will enable you to apply the most effective strategy to acquire, start, or take-over any type of business without much effort. By being strong-minded and determined, you should not feel intimidated by the seller and his requirements. You should enter the negotiation with confidence and leave the room a winner.

Question: Where can I find the money to start a company?

Answer: You can often use the assets of the business you are buying to pay for the purchase. I'll describe in detail at least five or six ways you can count on the seller for the money you need to open the business. After that, I'll give you other ways (in report # 6) to get the money if the seller can't fund you the capital, or if you're simply starting a business from scratch. In fact, it could be even more advantageous to use the seller's money for the purpose of buying the business.

Question: Is buying or starting a business really that simple?

Answer: It is simpler that you might think. Sellers are looking desperately nowadays for buyers to acquire their business. With the Internet craze happening in the past decade, many entrepreneurs have been opting for on-line businesses instead of relying on traditional "brick and mortar" ventures. Sellers are getting desperate to exchange ownership and will rely on any buyers' requests. This advantage will enable the buyer to close any deals on their terms. These procedures are simple to apply with the understanding that all transactions are clear and accepted between both parties (buyer and seller) in question. Think about it: The parties in a business acquisition transaction rarely, if ever, reveal the intimate details of their deal, so you aren't likely to know much about the "no cash" acquisitions that happen every day. With that said, I would estimate that one of every two small businesses is sold or started with absolutely no cash investment from the buyer--yet still satisfies all the seller�27s objectives.

Question: Is there any good time for me to consider buying a business?

Answer: It is imperative that you think thoroughly before considering the purchase of a business. You should consider your experience and what you enjoy doing. If you are interested in a business that has a product or service that is outside your area of expertise, then you should make certain that key employees will stay on after the change in ownership or that similar expertise can be hired.

It is equally important that you should identify the desired location(s) and the amount needed for the purchase. You should then assess what the realistic possibilities are of obtaining the funds from outside sources (family and friends). One should also decide on the size of the business in terms of sales, profits, and the number of employees.

It is important to determine if the business you wish to buy is to be one that is profitable and stable or one that is losing money and in need of new management. The more profitable and stable a business, the more it is likely to cost. In retrospect, a healthier business can be easily presented to potential investors to obtain the desired amount of money (if this option is chosen).

Question: Give me some examples of entrepreneurs who "made it" without any of their own money?

Answer: Here are a few stories of entrepreneurs who have always inspired me and I think they'll do the same for you. (You may even recognize a few...)

Example: Paul Orfalea, a student with below average grades just out of college, started the now-famous Kinko's copy stores without a penny of his own money. It began in 1971 when he convinced a commercial bank there was a big demand among college students for a convenient, multi-purpose photocopy shop. The bank loaned him $5,000 to take over an 80-square-foot hamburger stand for the purpose, and Orfalea went on to build his tiny operation into a $400 million chain of nearly 800 stores throughout America. By studying the market and the needs of the student community, he was able to pull through and follow his dream of being his own boss. Not bad for a small start-up.

Example: Ray Kroc was a 52-year-old milkshake salesman back in 1955 when he convinced brothers Mac and Dick McDonald to sell him their lonely little hamburger stand near Burbank, California. Since Kroc didn't have any money, he worked out a unique and highly leveraged no-cash-down arrangement. On his first day in business, Kroc's cash register rang up close to $400.00. "It rained that day," he later explained. The following week, the sales doubled. Today, McDonalds reaches the 20 billion dollars/year sales mark. Quite impressive isn't it? McDonalds is both the biggest owner of commercial real estate and the biggest food service corporation in America. Ray Kroc didn't have to spend a penny of his own to start it all.

Example: Tom Monaghan, a 1960 college drop-out, partnered up with his brother and bought a bankrupt pizzeria in Ypsilanti, Michigan, securing a bank loan in order to satisfy his end of the deal. A year into the business, Monaghan bought out his brother and developed a soon-to-become brilliant game plan: open stores near college campuses and military bases and promise delivery in 30 minutes, or the order is free. Domino's Pizza is now an America fixture, taking in annual sales of nearly $1 billion. Monaghan gets to indulge in a rich man fantasy by owning a major league baseball team, the Detroit Tigers. Not bad for a guy who didn't have a spare dime to his name starting out.

Example: Ernest and Julio Gallo knew nothing about winemaking when they started out back in 1933. So what did they do? The brothers studied pamphlets on the subject at the local library! Then, because these future bright entrepreneurs were unable to secure a bank loan for their proposed winery, they arranged to get 90-day credit terms from a maker of crushing and fermenting equipment. And they got their first grapes from local farmers with the promise of paying them once they sold the wine. The Gallos sold their first 6,000 gallons to a Chicago wine distributor, and the rest is history. Gallo is now the largest winemaker in America with annual sales approaching $600 million. And it all started without a penny of their own.

Question: You're right, these are tremendously inspiring stories. But do entrepreneurs today have the same kind of promising opportunities?

Answer: Absolutely. In fact, according to an issue of Inc. Magazine, "the financial system that was accessible to [earlier entrepreneurs]... remains equally accessible today." We are in an era in which technology is improving at the speed of light. We hear everyday about new entrepreneurs selling their businesses (internet and software companies) to corporate giants for several millions of dollars. In trying to understand how this kind of acquisition is being done, there are a few questions that come to mind. Under whose terms is the business being sold? Are the buyers actually submitting a check for the amount of the announced purchase price? The answers to these questions are not readily available to the public. It is kept between financial experts and the parties involved in the transaction.

What you need to understand and not be afraid of is the wheeling and dealing of these kinds of acquisitions. They do not happen in the ways portrayed by newspapers and magazines. Be very aware of the information about to be revealed to you.

Let me give you more details on this subject. These new start-up companies in the I.T (Information Technology) industry have something that corporate giants want. A large corporation meets with a newly formed start-up company and proposes a deal to its sellers. The amount revealed in the newspapers is only the market price or potential future revenues of the start-up company. The company can be a sole proprietorship or limited liability corporation (see report #2). By acquiring the company, the corporation will create a different entity out of the newly acquired start-up and submit an IPO (Initial Public Offer), by which the company enters the world of the stock market.

By submitting the IPO, the Corporation is using outside financing or leverage (other people's money) to finance the acquisition. The public has access to the company's stocks and has the ability to buy them.

With the money received during the IPO, the former owners will receive their shares (in dollars) and the Corporation will continue managing the newly acquired company. Only major acquisitions are published and talked about (after the transaction has been completed).

I don't want to pretend it's easy and automatic to achieve these same levels of success. It takes a lot of determination to attain these goals. What I can assure you, with great certainty, is that money should be the least of your concerns. With some savvy advice and a love of independence, you WILL succeed, perhaps far beyond your expectations.

$ummary

* You can open any size or type of business with absolutely no cash of your own (and make a six figure income).

* You can often use the assets of the business you're buying to pay for the purchase.

* Though rarely publicized, it is estimated that one out of every two small businesses is sold or started with absolutely no cash investment from the buyer.

* If you are interested in a business that has a product or service that is outside your area of expertise, then you should make certain that key employees will stay on after the change in ownership or that similar expertise can be hired to help you through the initial change.

* Entrepreneurs, such as Paul Orfalea, Ray Kroc and the Gallos started their businesses with no money of their own, and became some of the most successful businessmen in the 20th century.

* Money should be the least of your worries when starting or buying a business.

by Dan Amzallag