What is the Best Path to Entrepreneurship in 2024?
The video Matt reacts to gives us 3 ways how one can become a business owner. Matt dives a little deeper into each of these.
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
Video Transcript:
Business Advice Video:
If you don’t wanna invest in real estate but you wanna buy a business instead here’s what you should invest in. You have three options when it comes to a business. You can start one, you can buy one, or you can do a franchise. If you start a business and you don’t have a lot of entrepreneur experience this is the hardest path. If you buy an existing business it doesn’t even always require cash because if it’s a successful business. Let’s see that it is spinning off $300,000 a year, then you could say “Hey I wanna buy your business for $300,000 and I want three years to do it and every year I’m going to give you a third of the business’s profits.” The third option would be to buy a franchise. If I buy a franchise and it’s working then maybe I should own 50 of them, maybe I should own 100 of them.
Matt’s Review:
Okay, so starting a business definitely can be hard, unless you’re starting something that you already know how to do and have been doing and you’re just finding customers to do it for instead of working for somebody who’s bringing the customers to you. The nice thing about starting a business is you start it with no debt. So you – if you’re starting something like a graphic design business or something that doesn’t have hardly any startup cost or an accounting business, then as soon as you get your first few customers you’re already making money, already profitable. And you can grow from there. So starting a business isn’t a terrible idea. Starting a business you don’t know how to run, that has a huge upfront investment to it, that’s a bad idea. But blanketly saying starting a business is a bad idea, I think it’s not accurate.
The next part, buying a business, yes, there are a lot of baby boomers retiring and selling businesses. Now is a good time to be a business buyer. But to imagine that you’re gonna say to somebody whose business generates $300,000 a year that you’re gonna buy it for one year’s profit and then pay them over three years, well good luck, right? There’s very few people who are dumb enough to accept that deal. And chances are they build their business up to making $300,000 a year for them they’re probably not stupid and they’re probably not just gonna give it away to somebody who offers them a terrible deal. As I’ve been talking about in my you know “Would I Buy This Business” series, most businesses sell for between two and a half and three and a half times. So if a business is kicking off $300,000 a year, it’s gonna sell for 700,000 to maybe a million dollars, not 300,000. And you’re not gonna find a seller who’s gonna accept you paying them over the next 10 years with nothing down. So you can imagine that scenario, you can always ask. But it’s the same as going up to somebody and saying “Hey I’d like to take your car from you and I’ll give you, you know, some amount of money each month for it but I’m not gonna give you anything down and I’m not gonna pay you what it’s worth.” Why would anybody do that? They can take it to Carmax and get a check today. Why would they give it to you for nothing? It doesn’t make any sense. It’s very rare that it happens.
And then the last part about buying a franchise. Yes, you can invest in a franchise and if it works out you can save your money and buy a second one or third one. A lot of people do that. That’s not really an innovative business idea. It’s just that’s what a lot of people do, they get into a franchise system that’s working well for them and then they multiply their profits by buying more. It’s a very good idea. I don’t think he thought of it, but I agree with this idea.
