The idea of acquiring a business where you do not have to be involved daily and can generate passive income sounds terrific in theory. Unfortunately, in the real-world, it does not work well in most cases. This is especially true in smaller businesses and even more so for a new business owner.
Absentee run businesses usually equal absentee profits if you do not have the right team and a proper management plan in place.
Unless you have a wealth of experience operating a business, how can you know who is the right person to run it if you do not even know how to operate it yourself?
There are several alleged ‘gurus’ selling over-hyped programs that will allegedly teach you how to acquire an absentee run business to generate passive income. Of course, amongst their many nonsensical claims is how you can not only buy these businesses for no money down, but they are also ones that generate hundreds of thousands of dollars in profits, and even better, you can do all of this in about one month. Do not fall for these ridiculous scams. It is completely delusional.
The more important issue to discuss however is the entire concept of buying a hands-off business. It is certainly possible to build a business with the plan of handing the daily operations over to a manager and evolving from an owner-operator to an overseer. It is a terrific idea. But there must a plan in place to do so.
For a new business owner, it is crucial to immerse yourself in the company initially so you understand how it operates, what improvements should be made, who are the key people, what growth initiatives make sense, what problems need to be fixed, and a whole lot of additional aspects you must learn. And therein lies the issue: you must learn the business first before you can determine what is the ideal manager profile. Think about it: you buy a business and go in on day one. You do not even know how to turn off the alarm yet so how can you possibly know who the best manager is to put into place? Even if there is currently a manager, it takes time to know them, to trust them, and to be confident you are willing to place your bet on them to manage your investment.
Also, what if the manager quits? Now you are stuck with an investment, and you do not even know how to operate the business until you can replace them. It is a guarantee that the business will head south quickly. Even if there are other staff in place, if you have not been involved in the company, the employees have no bond with you, and certainly no confidence that you can operate the company until a replacement manager is in place. This scenario is a recipe for turmoil.
If You Want To Do This Then Do It The Right Way
If you are thinking about buying a business and your goal is to have it run absentee, the ideal plan is:
- Determine what type of business you can acquire that can easily transition to you as the new owner
- Learn the business by working full-time initially
- Analyze and evaluate the staff, systems, clients, and all other components of the business
- Maintain a list of the functions that you, as the boss, do each day
- Get to know the employees. Identify any who may potentially be capable of running the daily operations
- Build a profile of the ideal manager
- Once you understand the guts of the business and what it takes to operate and drive it forward, you can begin the process of hiring a manager to replace you
- Allow yourself a three-to-six-month transition period working side-by-side with the manager
- Set up formal reporting procedures so you always know exactly what is going on
- Always maintain control over the company’s financials, the bank accounts, and outgoing payments.
- If you determine the person you hired is not right for the job, fire them quickly and repeat the exercise
It is certainly possible to build a business so that you can eventually be a hands-off owner, but it takes time and a good plan. If you do it the right way, it can be a very lucrative situation. If you do not do it diligently, you may find yourself out of business quickly.
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