Saturday, February 24, 2024

The Hidden Dangers of Businesses with No Asking Price

I have an interest in discussing a topic that I received years ago – “businesses without specified asking prices”. 

Inspired by a question from one of our viewers, I'm eager to provide some illuminating insights into this intriguing subject.

Dead Capital and the Real Issue:

I've encountered situations where businesses are presented for sale with no asking price, and upon closer inspection, I found a common issue—dead capital. 

What's dead capital, you ask? It's when business owners have invested in machinery, inventory, and other assets that aren't generating a sufficient rate of return. 

In simpler terms, the business isn't justifying the capital invested in it.

The Cash Flow Conundrum:

In the two instances where I was brought in to assess such businesses, the cash flow didn't align with the tangible products and assets involved. 

Whether it's machinery, inventory, or infrastructure, the return on investment wasn't up to par.

 This mismatch between the value of the assets and the actual cash flow is a red flag.

Warren Buffett's Perspective:

It brings to mind a quote from Warren Buffett, who once mentioned that if you want him to consider buying something, you need to put a price on it. 

The idea is simple—transparency in pricing is crucial for making informed decisions.

The Auctioneer Dilemma:

Traditionally, businesses facing dead capital would head straight to an auctioneer, liquidating assets to recoup some value.

 However, a growing trend involves attempting to sell these businesses as going concerns, hoping to find a buyer willing to pay more than the sum of its parts.

The Buyer's Dilemma:

For prospective buyers, it's essential to be cautious. Businesses with no asking price may be concealing a deeper issue. 

The real challenge is distinguishing between a genuine opportunity (perhaps with a redevelopment angle) and a business burdened by dead capital.

Navigate the World of Business Buying:

If you're intrigued by the prospect of buying a business and want to avoid costly mistakes, consider enrolling in my online course, Business Buyer Advantage. 

It's a comprehensive program that guides you through the nuances of acquiring small and medium-sized businesses.

Visit to explore the course, watch an informative video, and take control of your journey in the world of business acquisitions.

Be sure to never miss any of my great content or special offers by being on my email list at 


David Barnett

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