Is This A Smart Way To Aquire A Business?

Summary

Podcast Summary: "Is This A Smart Way To Acquire A Business?"

Episode Details:

• Title: Is This A Smart Way To Acquire A Business?
• Host: Ramsey Network
• Release Date: August 1, 2025
• Duration: Approximately 9 minutes and 40 seconds

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Introduction to the Caller’s Situation

Alex's Background and Current Challenge (00:06 - 02:11): Alex, a seasoned digital product manager with over eight years of experience in the tech industry, faced an unexpected career setback when his company underwent layoffs in March, resulting in his unemployment. Relocating to Indonesia, Alex and his family have been sustaining themselves through savings and incidental jobs, such as house pressure washing and floating dock installations. Despite having no significant financial obligations like car payments, Alex is actively seeking stable employment but has yet to secure a new position.

Notable Quote:

"We've been living off of savings. We don't have any sort of big payments like car payments or anything." — Alex at [00:06]

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Exploring Freelance Opportunities

Discussion on Freelancing Viability (02:11 - 04:00): Dave Ramsey probes into Alex's potential to transition into freelancing, given his expertise as a digital project manager. Alex explains the niche nature of his role, which typically involves long-term engagements (often a year or more) rather than short-term freelance projects. This specialization limits the availability of freelance opportunities, making it challenging for him to pivot effectively.

Notable Quote:

"I've been applying, doing my best to find work but it just hasn't been working out for me." — Alex at [00:49]

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Acquiring a Floating Dock Installation Business

Opportunity and Initial Evaluation (04:00 - 06:48): Alex introduces a potential business acquisition opportunity. He has been assisting a 74-year-old gentleman with floating dock installations. The business, operational for 16 years, generates an annual net profit of approximately $100,000. The owner seeks to retire and sell the business for $300,000, a figure Alex perceives as inflated. Alex proposes a purchase through seller financing, requesting $100,000 upfront, which the seller's wife rejects after consultation, indicating a reluctance to part with the business for less than the asking price. Alex admits his current financial constraints, highlighting that he cannot afford the upfront payment without further assistance.

Notable Quotes:

"He initially wants $300,000 for the business. The business is net profiting annually around $100k a year." — Alex at [03:16]

"So this is where I would either need to come up with some creative way with the seller or negotiate with him on the down payment." — Alex at [06:17]

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Dave Ramsey’s Analysis and Advice

Assessing the Deal and Financial Implications (06:48 - 09:11): Dave Ramsey critically evaluates the proposed acquisition, emphasizing the disparity between the asking price and the actual value based on net profits. He suggests that if the business were to hire a manager, the net profit would decrease to approximately $40,000-$50,000, rendering the $300,000 valuation unjustifiable. Ramsey further points out the absence of additional buyers and the risks associated with Alex relying on financial support from his parents, who are offering $50,000 from the sale of an overseas property. He cautions against overextending financially, highlighting the dangers of desperation in business decisions.

Notable Quotes:

"There's too much desperation in this. As soon as I get desperate, I get stupid." — Dave Ramsey at [06:52]

"If you put 50 down and he finances 50, that's fine. But that's a long way from 300 and him riding off in an RV." — Dave Ramsey at [06:17]

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Psychological Factors Affecting Decision-Making

Fear of Missing Out (FOMO) and Unrealistic Valuations (08:08 - 09:33): The conversation delves into the psychological aspects influencing business decisions. Ramsey explains that Alex's inclination to accept the deal may stem from FOMO—fear of missing out—leading him to attach an inflated value to the business based on potential growth rather than its current state. Ramsey shares personal experiences to illustrate how unrealistic expectations can result in dissatisfaction and perceived losses, even if the monetary value remains intact.

Notable Quotes:

"It's just FOMO. It's just fear of missing out. That's all it is." — Dave Ramsey at [08:59]

"But there's this weird thing in our heads that we make up a number, and if anything less than that number, we feel like we're getting ripped off." — Unknown Speaker at [09:03]

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Final Recommendations

Cautious Approach and Alternative Strategies (09:33 - End): Dave Ramsey commends Alex's entrepreneurial spirit and work ethic but urges caution against entering a business acquisition under pressured and emotionally charged circumstances. He advises against forcing the deal to fit his current financial constraints and suggests exploring alternative avenues to mitigate financial uncertainty without overcommitting to a potentially unfavorable investment.

Notable Quote:

"I'm going to tell you, this is... I be careful when you have to force something from every corner of the table to make it work." — Dave Ramsey at [07:32]

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Conclusion

In this episode, Alex reaches out seeking guidance on acquiring a business to stabilize his financial situation following unexpected unemployment. Dave Ramsey provides a critical analysis of the proposed deal, highlighting the importance of realistic valuations and the dangers of financial desperation. The discussion underscores the necessity of thorough due diligence and maintaining financial prudence when considering business acquisitions, especially under stressful personal circumstances.

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Note: Sections of the transcript containing advertisements and non-content segments were deliberately omitted to maintain focus on the core discussion.

Transcript

[Dave Ramsey]

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[Alex]

So I work or worked as a digital product manager for the last eight plus years. Just within like the tech industry. Unfortunately in beginning of March our company did a bunch of layoffs and I was a part of that cut. And so as of March I have been unemployed looking for work in Indonesia. Meantime we've been living off of our savings. We don't have any sort of big payments like car payments or anything like that.

[Dave Ramsey]

Why aren't you freelance? If you're a digital project manager, you ought to be covered up in freelance work.

[Alex]

That has not been the case for me. I've, I've been, I've been applying, doing my best to find a work but it just hasn't been, it just has been working out for me to.

[Dave Ramsey]

I mean how are your buddies that are freelancing getting work as a freelancer? I'm not talking about a new job, I'm talking about just freelancing.

[Alex]

Right. So I, my specialty is product management. So I help companies develop software and scale some of their products. So usually it's not necessarily freelance. It would be you know, anywhere from like a year plus a gig to get those. So there are very few short term freelance gigs for product management that I've been able to come across.

[Dave Ramsey]

Okay. I don't, I wouldn't doubt that. That does, we've got, because we've got digital project managers on our team here and I know what they do. So I'm not arguing that point. So yeah, you're right. It's not like you're you know, short term project where you're writing code or something because that's not what you do.

[Alex]

Yeah.

[Dave Ramsey]

All right.

[Alex]

Yeah.

[Dave Ramsey]

Okay. So onto your question. I got, I got your picture. You're struggling finding work. I got it. Okay.

[Alex]

Yeah, yeah. So in the meantime as mentioned, we've been living off of savings in Canada. We have things like employment insurance here. But I've been also helping do random them jobs for folks like house pressure washing, floating dock installations and so forth.

[Dave Ramsey]

Good for you.

[Alex]

Kind of keep me going. Now there is this gentleman that I came across and I've been helping him with floating dock installations. He is 74 years old, he's been running a business for 16 years now and he is looking to retire and sell that business. So I thought it might be a good idea for me to look into acquiring that business. I've, I've done several docking like it's not necessarily rocket science. And yeah, he as mentioned he's 74. He doesn't do any sort of outside marketing. All of the leads that he gets are from the actual manufacturer or folks who find the manufacturer online. They fill out a form. He's a regional dealer here in Canada. And so he just gets all of his incoming leads through those forms. So he doesn't do any personal Google Ads or any sort of forms of advertising. And so with a digital background, I'm thinking of ways how this could scale and how I could use my skills to scale the business.

[Dave Ramsey]

So you want to talk to him about buying it? I got it. Okay, so what are we going to do?

[Alex]

So, so he initially wants 300,000 for the business. The business is net profiting annually in around 100k a year.

[Dave Ramsey]

After he pays himself a salary.

[Alex]

No. So he is an owner operator.

[Dave Ramsey]

Okay, I know, but I mean some owner operators have enough sense to pay themselves a salary. So he's not. Okay, all right. And so he's not really netting 100k because if he paid a manager to do the work that he's doing, he'd be netting 50 or 40, correct?

[Alex]

Yes.

[Dave Ramsey]

Yeah. It's not worth 300.

[Alex]

Okay. So that, that was my, my initial thought process as well.

[Dave Ramsey]

Yeah.

[Alex]

And so I've, I've brought it up to him, but I talked to him about pot, essentially acquiring the business through a seller financing, which he seemed initially open to, but because after he talked to his wife, because he's 74, he's kind of driving into the sunset. Basically, he wants a certain amount up front. Like a hundred thousand dollars up front.

[Dave Ramsey]

Which is probably about all the whole thing's worth anyway.

[Alex]

Which was my, my guess as well. So I currently do not have the funds to, to, to give him even 100k for the business. Right. Because I do not want to put my family into any further financial uncertainty.

[Dave Ramsey]

And so you don't have, but you don't have any. You don't have the money anyway.

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[Dave Ramsey]

You don't have. But you don't have any. You don't have the money anyway, and.

[Alex]

I don't have the money anyway. Right. And he doesn't want to do 100% seller financing.

[Dave Ramsey]

Okay.

[Alex]

So I was speaking to my parents, and they offered to. They are in the process of selling one of their properties overseas in Eastern Europe. And so they offered to sell that property and give some of that. Some of that money towards acquiring this business should the seller and I reach. Reach a deal. And so I wanted to get.

[Dave Ramsey]

They're going to give you 100 grand.

[Alex]

Not 100 grand. It would be about 50,000.

[Dave Ramsey]

So where are you going to get the other 50,000? You don't have it?

[Alex]

I don't have it. And so this is where I would either need to come up with some creative way with the seller or negotiate with him on the down payment.

[Dave Ramsey]

That's not a down payment. It's a payment. A down payment implies that there's a balance left. If you put 50 down and he finances 50, that's fine. But that's a long way from 300 and him riding off in an RV.

[Alex]

Correct.

[Dave Ramsey]

I don't think you're getting this deal. You're too far apart on price and terms, and your parents are giving you this money. It's not a loan. So you just lied. Okay.

[Unknown]

Here's my worry for you, brother.

[Alex]

There are some strings attached to it. Yes.

[Dave Ramsey]

Yeah. No. There's too much desperation in this. As soon as I get desperate, I get stupid. And you're pushing this from every corner of the table to make this tablecloth fit, and it's not going to fit. So I liked where we were going in general, and I love the fact that you're willing to do anything to try to feed your family, from pressure washing to loading dock installs to freelance to getting another job or anything. But let's don't get too desperate to be in the loading dock business to where we've got people pulling us from every side. We got the former owner pulling us. We got Mama pulling us. Everybody's pulling our hair out. We're going to be bald, man. Do it.

[Unknown]

What stops you from just starting this on your own?

[Dave Ramsey]

He doesn't have all the dealership Connections. Okay, this guy owns. This guy owns the territory.

[Alex]

He owns the territory. Correct?

[Dave Ramsey]

Yeah, yeah, yeah. It's harder, but, I mean, you can go build decks on the backs of houses or something. I. Alex, I'm going to tell you, this is. I. I be careful when you have to force something from every corner of the table to make it work. There's nothing in this entire story that was a hot knife through butter. There's, you know, you got. You got stuff coming at you from every angle telling you not to do this. And that's not just God challenging you. It's him telling you don't do it. There's a difference.

[Unknown]

And my fear for you, Alex, you have already done the digital marketing math in your head, and you've already spent the money that you think you will make on top of this business.

[Dave Ramsey]

No, you don't. You don't pay somebody for what you might grow it to. Right? You pay it for. Pay them for what it is. And right now, it is a business that's worth somewhere around 150, 200k max, not 300. And he's not got any other buyers. I don't care what his wife thinks.

[Unknown]

Dave. What. I'm asking you this, and you should be asking me, but I'm asking you, what is the psychology behind. So let's say this guy says, I make a hundred grand. And Alex here says, man, if I digitally market this, I can scale it and do this and this and this, I could make 500 grand next year. If he doesn't do this deal, his mind and body will feel like he just lost half a million dollars. You know what I mean?

[Dave Ramsey]

Yeah. It's just fomo. It's just fear of missing out. That's all it is.

[Unknown]

But there's this weird thing in our heads that we make up a number, and if anything less than that number, we feel like we're getting ripped off. And we lost it.

[Dave Ramsey]

Yeah.

[Unknown]

And it's just. It's. It's a.

[Dave Ramsey]

You know, it's a strange loss. You know, one time I put an unrealistic price on a piece of real estate. Yeah. Really high. And then when a guy came in under that, I was, like, pissed.

[Unknown]

He took 500 grand from me.

[Dave Ramsey]

I was unrealistically priced to start with. Yeah.

[Unknown]

Or if you call me fishing for California suckerfish, you a raise. Come on. My office. And you gave me 100 grand, but in my head, I thought it was gonna be 200. I'd be like, yeah, that dude took 100 grand for me today.

[Dave Ramsey]

Exactly. That's so crazy. So it's a bass ackwards thing, but that's the way it is, so. No. Yeah. Honey, I. Listen, I love business and I love your entrepreneur skills, and I love your. Your work ethic and your willingness to humble yourself and go do whatever it takes to get something going. You're a good man. You're going to find something. But don't step up in a bear trap in the process. And this smells like bear spray to me. Create your free every dollar budget today. The simplest way to budget for your life.