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Using OPM or Sweat Capital to buy a business

I receive a number of calls and e-mails from individuals who would like to buy a business. Typically, they are very talented individuals who have made a great deal of money for other people and would like to start making money for themselves. 

Their problem, generally speaking, is a lack of capital. As most of us know, buying something without the “cash” requires credit in some form. I usually take the individual through a process to help them explore their options:

First, you must have a proven history of success in business and with people.  If so, you now have a saleable benefit.

Two easy options to explore are:
OPM (Other People’s Money): Do you have or know of people who would be willing to invest in you?  If you have a proven record of success along with a great business opportunity, you will be amazed at how many people will be willing to invest. Just remember, you still have to report to the investors. And you can’t make all the rules, until you own it.

Sweat Capital: There are many businesses that are in need of proven management, specifically businesses that have fallen on hard times; not because it is a bad business, but just poorly managed by the owner. For whatever reason, the owner has lost interest, the business out grew them, the employees are no long motivated, et cetera. These are ideal situations for someone with a proven track record.  Generally the owner and the potential buyer (you) agree to let the potential buyer come to work as a (a possibly unpaid) consultant based on agreed to criteria. And if you prove yourself  - let’s see what you got kid - then you will be awarded a position with the company. Naturally, to go along with your new position, would be an agreement spelling out the terms and conditions which would allow you to buy into the company by using your “Sweat Capital”.

Sweat Capital may be a unique way to buy a business if you lack investors; it may be the only way to accomplish your goal.

Feel free to contact me if you have questions or would like to have a discussion.

- Steve Sink


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