Infomercials. Remember back that far? Do you remember what it was like back then? Before the slick infomercials pushing everything from juicers and exercise programs to male enhancement products?
I once heard advertising defined as the ability to arrest human intelligence long enough to extract money from it.
Remember back that far?
Do you remember what it was like back then? Before the slick infomercials pushing everything from juicers and exercise programs to male enhancement products?
Human nature doesn’t change. We purchase the item, product, oourse, or ... but what we really buy is the dream of a brighter future or the promise of a better life.
What we too often forget is the key to our success always lies within our reach - despite the efforts of most marketers to convince us otherwise. It's never going to be "out there."
I can't remember who said it, but I've always remembered the phrase, "most people are too busy making a living, to ever make any real money (J. Carbo?)
Anyway, in that era before true infomercials, there were pioneers; one of those was a man named Art Hamel.
Art sold himself packaged as a home study course on "How to Be Your Own Boss" - meaning buy yourself a business. Art also taught seminars. It was a good course, but Art was always concerned that people would take the course, go home, and do nothing to put their newfound knowledge to use.
So, at his workshops, he would force you to use what you had just learned. Now. Today. At the course. And usually in a town totally unfamiliar to you.
Whether or not you had a really good grasp of his theories was less important to him than getting you to try something quickly. He was always in the background to make sure you didn't make any disastrous "rookie" mistakes.
I don't know about anyone else, but his methods sure worked for me. I learned a great deal about myself, negotiation, and people in general. Great lessons all.
Here's what I did with some of that knowledge: I bought businesses. Small ones at first, but larger and larger as time went by and my skills improved.
I learned quickly to focus on franchised operations. Most of these had systems in place for everything from advertising to zoning request information for new operations. With a good system in place, I was free to concentrate on the business (as Mike Gerber later said) rather than in the business. And I could go on to the next deal.
Franchises came with another great benefit - good ones were almost always profitable from day one. And they usually had a range of accepted values to aid in their purchase (and subsequent sale). Often, the parent company re-purchased franchise operations for a variety of reasons (for cash or stock). Sometimes, they would even loan money to purchase the franchise.
I also learned that many of the service franchises have extremely high nets. Forty percent or more was common. In other words, they made cash and lots of it.
My purpose in purchasing these operations was to eventually get to the real estate. I would look for those franchises with their own RE, buy the whole business, and then flip the business, keeping the RE (now leased to a franchise tenant).
Overall, it worked very well. I still do some of this today.
Art taught me many things, but a couple stand out from the rest.
He was the first person to ever tell me that most small business people have simply bought themselves a job. And if that job wasn't making you at least $100K per year or so, why are you bothering with it?
Not only was it not a good use of your time, but the low net available to you personally made the business more difficult to sell to the next person (why would they do it either, right?) and it wouldn't offer you the extra cash for other opportunities that came along.
Even though I heard him say this, I still didn't really understand it until much later.
He also taught me the power of questions. Just ask. I was quickly able to walk up to any business owner and begin to ask meaningful questions (and get the answers) about their operations.
The best deals I ever made always come about through personal contact with the owner. I just asked if the business might be for sale.
Do I have to say that almost every one of these skills later translated very well to other ventures?
Didn't think so.
A couple of points: In over 30 years of doing this, I never had to repo a business. My goal was always to get a good long term tenant; that meant the tenant had to make money for themselves too.
Also, most people forget about upside potential and that whole concept of "upside" (potential) has made me a great deal of money.
Warren Buffet feels pretty much the same way, but you need to realize that without Charlie Munger, Buffet's chief strategist and right arm, Buffet wouldn't have come this far. It was Charlie who convinced Warren of the value in buying business operations which make money now and will make even more money in the future.
Two points you may want to remember:
Buying good things that have a chance to get even better is always a good strategy.
And the best way to ensure you have money in the future is to actually be able to make money in the future.
Unfortunately, a lot of folks don't seem to get these either.