How ChatGPT could have saved me $700,000

Five years ago I bought two companies

☠️ One died ($700k+ loss)

🚀One grew 10x

Don't make the same mistakes as me.

I’m going to share at the end how ChatGPT would have helped me… .. but first here are my lessons learnt the hard way.

You are buying someone else's problems

It can work out well...Or it can be a total loss

It all comes down to 9 key points...

1. Your target company MUST HAVE:

• Low churn

• High margins

• A stable, expanding market

• A product that customers NEED

• A real incentive from the seller (retirement > money)

• Platform independent, eg not reliant on Google or FB

This next point is so important...

2. Buying a business takes a LOT of time

And it is difficult to reverse out once you have committed time even when you know you're buying a pile of 💩

Throw your ego away, because, like buying a boat...

3. Business purchasing has two wonderful days

The day you buy it and the day you sell it. Think CAREFULLY about the commitment, it's more than you think of course, you're different (I was too!)

But...

4. Making $$$ from buying businesses is HARD

You’re up against tough competitors like Constellation Software(The Berkshire Hathaway of software). Constellation's annual reports explain how: Think: Low multiple, mission-critical, low churn & price increases

But also...

5. Understand the motivation of the seller

People that NEED to sell are 100x better people than WANT to sell

Read that again 👆

Look for retirement or change of personal circumstances, if the story doesn't feel right, it isn't right.

Here's why...

6. The seller understands their market better than you

They can hide or reveal the truth

Depending on their motivations.If the seller has the right motivation to sell They will want to help you succeed in with their business.

I missed this next step, it cost me $700k:

7. Talk to their customers BEFORE making an offer

You'll find out what you need to know, turns out half the customers in my $700k purchase didn't even use the product. The price tag was so low they didn't churn - until they all did

A day of calls would have saved me $700k...

…but I didn’t think of that.

I should have asked ChatGPT:

And if by magic ChatGPT tells me to look out for low customer satisfaction.

Obvious, but I missed it.

We’re not used to being able to consult experts, just like that. So we try and work everything out ourselves.

My takeaway is this: I’m retraining myself to always ask ChatGPT first.