Personally, I prefer to create my own businesses. But, I operate on a micro scale. That way I understand the business from top to bottom, have experimented and grown with the business. Investors on the other hand don’t want to build anything. They analyze and buy, but most of all, they say, “No!”
Very few businesses make good profits. Discretionary cash flow is another serious issue which involves earnings before interest, taxes, depreciation, and amortization. Some fudge their numbers here which is why you need to be very seasoned to survive as an investor — seasoned in catching frauds!
Intangible assets are something that sellers don’t always understand fully. Trademarks, patents, secrets and just plain having people who trust you & vice versa can be a company’s most vital assets. On the other hand, it might be hard to define a value that an investor would respect for such un-assessable assets.
The commitment and passion of the owner is another factor that investor’s can’t ignore. My business is successful because I micromanage everything just to the right point. I know all of the processes and I’m an expert at all of them except for programming which I outsource to people who normally do not meet deadlines… ever… How would an investor survive in a small business that’s survival rests in the hands of its loving owners?
Personally, I feel that you should not invest in any business you don’t completely understand. Warren Buffet agrees with me on this. He goes to the extreme of not being willing to buy much stock in a company he doesn’t completely understand. This world we live in of buying selling, not being committed to anything is just crazy. In my opinion, buy a car and keep it until it dies. Create your own business and keep it until you retire or die.
On another note, if you want to create a BPO with the intention of selling it five years later and getting rich, it might be hard to find a buyer. Few people know how to handle a BPO. Your only real options might be large companies in the same industry that you are in. But, why would they want to buy your operation when you are not operating on the same standards that they are? Think about it from the buyers perspective and then you’ll see the brilliance of my create and hold for life strategy.