Welcome Avatar! Lately, we’ve been getting a lot of emails suggesting that it is profitable to buy companies and simply integrate AI. This sounds good because it hits on the same old thing that people pray for “a button to get rich”. Unless you’ve already paid the life tax (about 3 years of pain and suffering), trying to buy blindly is going to lead to significant losses some 99%+ of the time.
Instead of just belaboring that point we’re actually going to walk through how fast it can blow up. Not only will this be useful now, but in the future. After you solve your own first win, you can revisit this one and make sure you don’t blow it all up for no reason.
By The End of this Post You’ll Understand Why This is Less Risky Than a Blind Buy
Example Business
You are willing to pay $900K for a E-com business. The math shows it earns $300K. 3x earnings (33% yield). Sound juicy as you’ll get everything back by 2029.
Then you start to dig and realize the owner is still the active manager. He claims to work 10 hours a week and if you replace him, the profit will still be there. This is classic “passive income” selling.
You decide to bite anyway “I’ll just run it myself”. Since you’re willing to work 40 hours a week and he was only working 10-hours a week, it should be a layup.
While the listing is showing accurate information on the financials. It is unlikely showing accurate information on how the ROI is generated. Those are completely different things. People are not going to lie about things that are verifiable. If they claim it makes $300K in profit it probably does. There is no way to verify the hours or how the customers are retained (in great detail) especially for a small business.
We’re going to create a simple example to avoid the common pitfalls. In addition, since this is a legit path once you’re savvy, we’ll explain how it can be a home run.