Only the Patient Prosper

Question: Twenty years ago I started a business. As a result of luck and hard work, it grew beyond my wildest expectations. One of my suppliers offered to buy me out and I took the deal. Now I am sitting around with a pile of money and nothing to do. How often do guys like me buy a second business at this stage of life?

Answer: Usually just once. It only took once for Fred.

Fred is a classic American success story. After coming home from World War II, he borrowed enough to buy a small time fast food equipment manufacturer. The company was dead last in their industry, but Fred had his eyes on nothing less than first place. It took thirty years of hard work, lots of travel, innovation, risk taking and a dash of luck, but Fred moved into first place in his industry and sold his business for a handsome sum.

Fred was not even sixty when the buy out took place. The first six months were spent doing everything he'd been wanting to do, but was too busy to do it. But Fred soon found out that there is only so much travel, eating out or buying stuff that he really wanted to do.

One day, he woke up, looked in the mirror and said, "I'm bored. I want to get back in the game." That was the day Fred decided to buy a second business.

Fred turned the full focus of his skills and experience on finding "the perfect" business for him. It took a year, but he finally found a business that seemed to suit him. It was also a manufacturing firm (like the company he'd built), though in a different industry. Fred was confident that his expertise would cross-over well into this new industry.

Today, Fred will tell you that within three months, he knew his new dream was going to be a nightmare.

His new company had more than a few skeletons in the closet - problems no one told him about. He soon realized how much he'd leaned on the reputation and industry contacts he'd built over 30 years in his former company. It hit him like a cold slap in the face when he reached for them in his new situation…and they weren't there.

His new company's manufacturing problems created the need for more and more cash to be infused into the struggling business. Within six months Fred knew he was in over his head and in danger of losing everything he'd built over his lifetime. He wanted out and wanted out bad.

Fred knew he'd lose a bundle if he gave in to his emotional panic, so he focused on cutting costs and stabilizing the business. Growth was out of the question, as that would cost additional capital (i.e., more of Fred's money). But at least Fred might be able to keep the ship afloat long enough for a buyer to come along.

It took 18 months (it felt like 18 years to Fred), but a buyer did finally come along and Fred was able to divest himself of his albatross. Later Fred realized that although he got his money back from the sale of the business, that is all he got. He'd have done just as well financially if his money had been in a shoebox for two years. But Fred was elated. He felt like his money had been in a coffin.

As you might guess, not all the Freds of the world are this lucky. Some do lose it all. So here are a few questions Fred himself might ask you before you purchase a second business:

Do you want a second profession or a satisfying purpose? Most achievers are very purpose driven. Often, their business is their purpose. Make sure you aren't just buying a second business to fill a "purpose void" in your life. Maybe it's time to look deeper.

Do you want control or influence? Control costs cash. Influence doesn't.

Do you know how much the thing might really cost? Make sure you know how much risk you are getting into.

Are you mistaking experience for expertise? Just because you were good in one specialized field of business does not mean you know what you are doing in another. You may figure out how to make the widgets, and still not know how to sell them in a specific market.

For the right person with the right reason, buying a second business may be a great idea and well worth the risk.

But I'm pretty sure Fred would tell you - don't be afraid to ask yourself a few hard questions before you take the plunge.