Buying A Business

If you are contemplating the option of purchasing a business or finding a business to invest in then you need to make a fundamental decision from the start.  If you get this confused then you are in for a very unhappy time.  The basic question is, “What role do you see yourself playing in the day to day operation of the business you are looking to purchase or sink your money in?”  This question is really basic to deciding what type of enterprise to look for and what your expectations of your say in the running of the company will be.

If you are buying a business in order to create a job for yourself then that is one thing, but if you want to be a passive investor then you will be looking for a completely different opportunity.  A passive investor is someone who puts money into a business but does not make any of the day to day operating decisions.  Generally, they do not worry about anything less than strategic goals which would be an overall direction the business is headed.  The day to day decisions are made by a hired manager, or sometimes, one of the investing partners will take on the management which is a different business function.

One of the worst situations for a business is when a passive investor wants to be involved in the day to day decisions but only sometimes.  Often times a tactical decision can not be made without thoughts of how it will effect other aspects of the business.  If the passive investor swoops in one day, makes a decision, and then swoops out only to return in a couple of weeks to do it again, he or she is creating a very difficult management environment for the person is actually held accountable for the profit and loss of the business.


Investing in a business can be a great way to put your money to work, but it is very important to understand what everyone’s role is in the operation.

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