buying a business | wealthymatters

Why Buy An Existing Business ?

June 24, 2012 2 Comments

Once you have made up your mind to enter a certain line of business , the next question is whether to start a new one on your own or buy an existing business. Both options are doable. Yet, buying an existing business might be an easy way out. Here are the advantages of selecting this alternative:

No waste of time and effort:You are spared the time and hassles of getting approvals and licenses.

Ready-made systems: When you buy an existing business you get employees with on the job experience.They are familiar with purchasing,marketing, selling, billing, financing and so on. You also take over a pool of customers who are time-tested and whose credit history is known. In addition, there are suppliers with whom workable deals have already been cut. Read more of this post

Filed under Entrepreneurship Tagged with Berkshire Hathaway, buying a business, Entrepreneurship, investing in a business, postaday

Why it’s better to invest in stocks rather than buy a business

March 6, 2011 Leave a comment

The following is a repetition of material found here https://wealthymatters.com/2011/03/06/the-dhandho-investor/ . But I think the material is significant enough to bear repetition.This is a list of reasons why a Dhandho Investor who wants High Returns but Low Risk should prefer to buy stocks rather than businesses.

I am rather indiscriminate when it comes to businesses.I would rather make money from a whole bunch of businesses rather than content myself with one source.And as the Indian economy explodes and money is made in so many different ways it’s so hard to pick just a few businesses to focus on or to put money in.The list below is my way of consoling myself for all the businesses I will never own.

With an entire business, you have to run it, or find someone who can. To be successful, this requires an enormous amount of dedication.
In the stock market, you’re buying a business that is already staffed, yet you still get to share in the earnings.
With whole businesses, often the sellers know a lot more about the business than the buyers, and furthermore the prices offered are not usually as attractive as they can be in the stock market. Read more of this post

Filed under Paper Assets Tagged with buying a business, buying stocks, High Returns Low Rsk, Indian Ecoomy, RandomBlog2011, The Dhandho Investor

Advice on Buying a Business

March 6, 2011 Leave a comment

This is a repetition of material from the last post.I just think the matter is important enough to merit a post by itself.This is Mohnish Pabrai’s list of to-dos when buying a business.By paying attention to the following 9 principles of the Dhandho Framework you ensure that you bear the least risk and have the highest chance of a big pay-off.Of course, buying shares is buying parts of a business so you can apply the same criteria to come out ahead.

Buy an existing business: you get a defined business model and have to invent nothing new.
Buy businesses in simple industries with a low rate of change: buy businesses that are necessary and not about to be replaced any time soon.
Buy distressed businesses in distressed industries: the very best time to buy a business is when it is hated and unloved.
Buy businesses with a durable competitive advantage: this advantage can come from being low-cost to having a brand to having captive customers.
Bet heavily when the odds are in your favour: if you must, wait for several years till the right opportunity comes by, then invest big-time.
Focus on arbitrage: exploit any discrepancy between price and value.
Buy businesses at big discounts to their intrinsic values: the odds of a permanent loss are low when this approach is followed.
Look for low-risk, high-uncertainty businesses: the uncertainty leads to severely depressed prices.
It’s better to be a copycat than an innovator: “innovation is a crapshoot, but scaling carries far lower risk.”