Ideas and Opinions from Donald Trump and TrumpU Faculty.
Why a Poorly Run Business Can Be Your Wisest Buy
If I told you that I know someone who bought a business nine years ago and just sold it for an 80% loss, you would probably think I was describing an individual who doesn’t have one iota of business sense.
But you’d be wrong, because that is exactly what Mercedes-Benz did a few days ago when they unloaded Chrysler. Here’s what happened, as reported by Mark Landler on May 14th in “A Corporate Divorce on the Cheap,” his article in The New York Times:
“The price of freedom for the soon-to-be-renamed Daimler A.G. is $677 million in cash - its out-of-pocket outlay in the $7.4 billion transaction - for Cerberus to take Chrysler off its hands. It is also shedding nearly $18 billion in health care and pension liabilities. For a merger once valued at $36 billion, it was a humiliating comedown.”
The article further states that Mercedes actually spent far more than the $36 billion they paid for Chrysler back in 1998. When you include the money they spent to improve and restructure Chrysler, they actually paid $60 billion.
“Don’t buy a business you cannot run,” is one lesson you can learn from this story. But I am actually going to offer a different take on the Chrysler-Mercedes split:
A business that is being run by the wrong people can be a great buy
Chrysler isn’t the only company in the world that you can buy today for 20% of what it was worth only a few years ago. So be savvy, hone your skills and you can find bargains in far smaller businesses too.
I imagine that you, like me, have looked at a business and thought, “They run this company so badly, how do they ever manage to stay in business?”
But have you realized that such businesses can be great ones to acquire? They are surviving, even though they are badly managed. Simply by managing them well - by providing better customer service or marketing more strategically or doing something else right - you can probably boost profits quickly.
Buying a business that is poorly run, but surviving anyway, might be a counterintuitive way to select a business to buy - but it makes a lot of sense. Incidentally, it’s just one of the strategies we explore in my Trump University Course, The Art of Buying a Business.
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7 Comments
You are absolutly right.
I will add that if the business in question is poorly managed but still profitable, chances are that the product, whatever it is service, actual product, etc...) must be almost selling itself.
And when taking over a business, that's what you want, a sellable, popular product.
Nicolas.
www.usatav.com
Jeff Collins
Professional Haberdasher
www.myhaberdasher.com
South Tel Aviv faces a severe water shortage due to climat change and over exploitation of resources, groundwater level have never been so low, shortly, desalination year 2002 Ashkelon, the largest membrane capacity of 320.000m3/day; Contract of Israel Desalination Engineering and Danker annual capacity 108 milion cubic meters. In Isla Canarias which depend hardly on thissame source of water, is a dead water , Mr Masaru Emoto have surely more to say about, and that the huge concetration of salt trowed back in the sea, well, is not sure that fishing will be a long estable profession there or world arround as large this economically competitive techniek is and working on how many plants world arround?! so the summ of high concentration salt how affect the soils the skin? is cheaper than spillways, hmm, and few tricks easy to be aplyed if the huge costs may be reduced as a summit interests to join with the target in mind that water there and the lowest fairly prices possible to make it happend at least in strategical locations as Jordan Valley, but is needet more, that shortcut of the whole weakness we confront as modern society*s no matter the country*s, Bible which talk about that period too and that coming back to respecting the rules will open the gates of teh Heavens and water and green back. As simple it is, as much we avoid by century, me at least struggling too, so just ask why planting trees and join Summit to help to balance a half planet poverty building houses at fairly prices with a bit changed way to do business yielding the counseil of Bible the transformation will be a huge one:more purpose more love more security and not so many young childrens loosed somehow by this modern temptations, drugs i mean and alcohol and accidents more productief people in benefit of all.
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Daniela
It is about strategy, very intelligent.
I know of a company where the boss is great at selling but his product is really lousy... I wonder where he gets the motivation to sell this product where every customer came only once, bought it, and never come back anymore... This kind of company, I don't think anybody will buy...
But come to think of it... A business which is profitable but it is not managed properly... Just need a little bit of refining here and there... Getting in "fresh blood" of directors and employees... Revamping its services for existing customers and its business system of generating new prospects... It's going to be a very profitable business! I believe it can go as far as 300% of its existing business profits!
Now I get the idea of buying low, selling high! haha
Charles
My Blog: http://charlesbizlessons.blogspot.com/
My Co: http://www.d3express.com.sg