A buyer from Buffalo came to me and wanted to buy an electronics business.
“Really? An electronics business?” I said. “What kind of electronics business?”
Rusty told me he wanted to buy one that manufactured printed circuit boards. Now that’s a pretty complex process. And he wanted one that could also do automatic soldering.
As we talked about what his needs were, I learned a lot about his business. And I found out that his business was operating at capacity.
“What kinds of sales do you want this company to do – the one you’re thinking about buying?”
“I don’t really care, because I’ve got more business than I’ll ever be able to handle.”
“Why wouldn’t you just go out and buy new equipment?” “My bank won’t lend me any more money.”
“Why don’t you lease the equipment, then?” The light bulb went on.
“Leasing? I never thought I could do that.”
I gave him the name of a couple of large leasing companies and followed up three weeks later.
“I got my lease,” he said, “and I got the equipment that I wanted. Now I’ve got to add some space for all of this.”
He thought that by buying a business he could borrow against the assets of the business. He thought the seller could provide some financing for him.
What he hadn’t thought about was that he would be split
in two locations. He would have a lot of customers he wouldn’t want. He would have employees he might not want. He would have a facility that was incompatible with the facility he had.
As it turned out, there was empty space next door. Rusty extended his lease to include that extra space. He leased the equipment he needed and carried on with his business.
Rusty never did buy a business. Didn’t need to.