If you enjoy going online late at night, chances are that, seemingly out of nowhere, ads will flood your screen about ways to buy a business with little or no money down.
“Most of the people behind these ads are cons, passing themselves off as gifted business coaches who want to share their insight — for a hefty price,” says Josh Tolley, nationally syndicated talk show host and author of Acquisitional Wealth.
My interview with him and article earlier this year, Four Big Mistakes to Avoid if You’re Buying a Business, yielded a bumper crop of emails and phone calls from the very people Tolley is referring to — all wanting me to interview them for a story.
“These people claim to be experts,” Tolley points out, “but not from expertise in running an actual business. Their entire purpose is to upsell you on more and more expensive coaching/seminars that are generally worthless but are intended to lead you to believe that making millions owning your own business is easy — if you follow their formula.”
How these scams suck you in
Why do so many people fall for these scams? Tolley says, “They appeal to that segment of the American population who realize they are not keeping up with inflation, or their retirement account isn’t going to work like they thought it would — so they are desperate for something. And these hucksters are giving them a little razzle-dazzle and milking them for tens of thousands of dollars.
“The initial come-on is a podcast with (an offer of) free content, such as ‘sign up now for my free newsletter on how to buy a business.’ Or, ‘sign up now for my free video on how to buy a business.’”
As Tolley describes, “If you want to know more, then you are encouraged to sign up for their ‘Mastermind Program’ that costs $5,000, $10,000 or $15,000 for a weekend.” And then if you want the elite-level skills, that will cost you as much as $30,000 or more, even $100,000.
Then, the reality is that once you attend these programs, since these coaches are not business professionals, they are not going to represent you like a broker, Realtor, lawyer or accountant would. And virtually all of them have never owned a business.
“Dennis,” Tolley notes, “I have met so many people who have fallen for these ‘learn all the secrets of buying a business’ scams, who have paid what they could have used as a down payment on a business but learned virtually nothing of practical value!”
Red flags to watch for
Now, you are probably thinking, What are the signs that I am about to get sucked into something I should avoid?
Tolley provides these answers:
- One course leads to more courses
- The person teaching the course does not offer the services of whatever it is they are teaching
- The person teaching the course has a track record of offering or teaching other courses on topics that are not related at all to the one they are pitching to you
- The “expert’s” social media posts are: “Look at me! I have mansions, fast cars, a private jet and yachts!”
“Notice how legitimate investment houses do not advertise that way,” Tolley points out.
Where do these business coaches come from?
So how does someone become a business coach? Many just read a book or attend a seminar and decide to do it. Or, as happened with one of Tolley’s former, short-term employees: He hired a firm to ghostwrite a book for him for $15,000 — he did not contribute to the book at all, but his name was on the cover as the author. A third-party company created the content, and a production company made videos and workbooks, and off he went, selling “his” product.
“The tragedy is that some of these ‘experts’ have become multimillionaires,” Tolley says. “We have followed their programs at hotels where they charge over $10,000 per person, and 300 people walk in! And what they teach is often just useless.”
What you should do if you want to buy a business
Tolley offers this advice for anyone thinking of buying a business:
- Avoid anyone selling these courses.
- Seek the assistance of a qualified and experienced mergers and acquisitions (M&A) brokerage.
- Don’t do it just because you’ve heard that it is a great way to get wealthy, even though it can be. Owning a business needs to be something you truly want, as you will be responsible for it.
- Make sure you understand both personal and business finances. If you do not understand the importance of deadlines, payroll, taxes and workers’ compensation insurance, you can expose yourself and your family to lifelong financial and legal ruin.
- It is wise to have some experience in the business you want to get into. Some of the best entrepreneurs are in businesses they don’t have experience in, but they know marketing, branding, advertising, sales, payroll, HR and leadership — they have the skills to run a business, but might not know the specifics of running this business.
Finally, ask yourself, “If CEOs with MBAs preside over companies that fail, how can I possibly succeed with my limited or lack of experience in the business world, just because I’ve attended these coaching seminars?”
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
