I don’t think anyone ever intends to torpedo their finances. Nobody wakes up one day and says, “yeah, I think today I’ll flush everything I’ve worked on the last 10 years down the toilet.”
But do the reasons matter after it’s already happened? At some point I became comfortable with the fact (at least on a superficial level) I was becoming nauseatingly deeper in debt. Debt that would have made me revolt with sickness just a few years prior.
Surprisingly, I don’t have expensive addictions. No gambling. No drinking. Zip on Golfing. And I still own the first car I ever bought (going on 14 years). What gives? How could an otherwise sane individual, an individual who avoided any debt for the first ten years out of college, rack up nearly $70,000 in debt in a matter of 8 months? Rather easily actually.
I hated working for other people. I hated that I had willingly jumped (quite willingly I might add) into the same rat wheel everyone else was on. The insanity of waking so I could commute half an hour one way to sit in a 4 foot by 4 foot man made jail cell was crushing me. I felt like I was dying every time I walked in the office. I hid deep within myself to cover the pain. The prospects of me having a mid-life crisis before I turned thirty were growing exponentially. So, I did something about it.
I started an online business. I worked at it until it made money. It was so successful that I was able to quit my job a mere 6 months after I started. This was back in 2005 when search engines could be manipulated more easily and Adwords clicks were only a nickel. But it still wasn’t easy (for all you get rich quick people).
For 6 straight months I didn’t go to bed before 3 am. The goal to quit my job was the sole reason the business grew so fast. Working from home was like manna from heaven. A real blessing. Silently, I said in my heart, “I will never work for anyone again”.
Fast forward 1 year from that point. My business, barely intact, survived an ugly partnership breakup (forgot to mention I started my business with someone I barely knew). My family and I moved back to our hometown 2,000 miles away to be closer to family and purchased a $376,000 house in the process (you know where this is headed). Thankfully, we put 20% down and were able to qualify for the best interest rate at the time given that I was self-employed.
One month after we moved in. That’s all it took before my business vanished. Completely gone. My income depended entirely on Google and now that single source of income was gone. Income that was supposed to sustain me and my now gargantuan mortgage payment for a long time. The new painting on our walls hadn’t even dried. So here I sat. No business. No job prospects (we moved to an oil and gas town). Nothing but a small savings account and home equity. I had to do something. Fast.
So I started feverishly searching online to see if I could buy up a few, money making Web properties to at least plug the damn hole, right? Actually, this played right into my plans anyway. Instead of building Websites one by one, I planned to do this very thing. Start acquiring smaller, more diverse sites so I could grow my business. Apparently I’d be starting a little sooner than I had planned. No problemo.
Buying a business is much much more difficult than I had ever dreamed. Not only had I never bought a business before, I was arrogant enough to think I knew what I was doing. As long as I had the money to invest, what difference did it make? Or so my ego led me to believe.
I won’t go into too much detail because I’ll be sharing more about my business buying experiences in the weeks and months to come. Below is a rundown of how I spent (spelled b-l-e-w) $70,000 in 8 months.
Purchase #1 – A content only Website for $12,000. It was a large network with oodles of content the previous owner had outsourced the writing for. Performed beautifully the first week. Then the previous owner pulled the plug on the traffic he was artificially sending to the site. Google reversed my earnings for that first week so, all-in-all, I lost the entire $12,000. He was gone. There was nothing I could do.
Purchase #2 – A Web services company for $8,000. Worked the deal through a broker which gave me more confidence (it shouldn’t have in case you’re wondering). Turns out the original owner was one helluva salesman. This was a Web based business in which the original owner would literally get on the phone every single day and close deals. I had falsely assumed it was all Web based and had existing customers. The site received less than a few hundred visitors a month. I re-sold the business back through the broker at a loss of $4,000.
Purchase #3 – Another Web services company. This time it was the real deal (riiiiiiigghhht). This guy had number one rankings for a handful of very competitive keywords. I checked out the stats and verified everything. I did every imaginable search I could. The domain name. The owner’s past dealings. His bank! Everything was rosy. This guy was in the newspaper in a major metropolitan area in Colorado on a regular basis. Finally! Someone who talks the talk and walks the walk. Price? A cool $52,000 with owner financing over 2 years. Perfect.
Let me take a break right now to let you in on a little secret. When you’re in the market to buy a business, you are the worst possible enemy you will ever have. I don’t mean to get all Jedi on you but you absolutely must get an advisor/mentor/butt-kicker who will speak objectively. Someone who has zero emotional investment in the deal. Not your spouse. Not your mom or dad. Not your brother. Someone who will poke you in the eye when they spot something fishy.
Get someone (an accountant, lawyer, whoever) and pay them. Pay the money to have them look over everything. You might think you’ve done some excellent due diligence. You haven’t. You’ve fooled yourself.
Ok. So, back to this gem of a story. After the seller and I worked out an agreement, I requested that we meet together in person. I promised myself I would never buy another high dollar Website until and unless I met the owner. He agreed to the meeting which gave me the confidence to seal the deal.
Fast forward a week. The deal was signed. The seller and I had met. I made the deposit. I was happy…until my assumptions started getting blasted away faster than a paper airplane in artillery fire. I was dutifully following the sellers instructions on how to run the business, deal with the existing customers, handle payments, until…
The the emails started coming. Not joy filled emails either. Customers were demanding refunds. To make a long, twisted story short, the seller (let’s call him Dave shall we?) had failed to deliver services bought by existing customers. Essentially, Dave got tired of all the work. In fact, he hated the work. He hated it so much that he decided to tell his customers he would be “bringing someone on board to help with the workload.” That would be me. The clueless buyer.
Could I have known this? Should I have know this? Yes and yes. Looking back, there were hints that should have sent flags flying. I asked a question for which I foolishly accepted a shallow answer. The question? “Are your customers satisfied with their level of service?” “Sure!” “Of, course!” came the replies. However, he failed to inform his customers that he was selling the business because he didn’t want to “spook” them away. Good call. How smart I thought.
But I could have called or emailed a handful of customers to get an idea of how satisfied (or not) they were with the services of XYZ Company as a prospective buyer of the same services. I could have had someone else call the company and see how he treated them.
Remember what I wrote earlier about fooling yourself? I was mesmerized by what I thought was the “holy grail” of business opportunities. And there I was again, with an empty bag of broken dreams, broken promises, and poor decision making.
Purchase #4 – A desperate $2,000 Website purchase. It was a cheesy info-product off eBay. All I had to do was re-post the auction on eBay a few times each week. I didn’t expect much but it worked surprisingly well. Until eBay stopped digital download type auctions. People weren’t interested in paying more for something that had to be copied to a CD and physically shipped. Don’t kid yourself, it wasn’t a huge money maker. But it did give me confidence that I could make another go of this Internet marketing thing.
Unfortunately, after this buying spree and April 15th looming like a locust cloud, I had to throw in the towel. I was staring bankruptcy and foreclosure in the face and finally had to do something. The one thing I had earlier sworn I would never do again—get a job. Length of time from first losing a business to then losing $70,000 throwing one bad investment dollar after another? 8 months.
That’s certainly not the end of the story. I hope to share more in the future. So, if you have specific questions about my situation or about buying a business (especially a Web based business) please ask in the comments section. I would love to help out.