***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:nnA 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. nnnn

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nTrump University Professor Richard Parker developed Trump University's self-paced multimedia home-study course on Buying a Business. Professor Parker bought his first business when he was 12 and sold it for a profit when he was 13. He has now bought more than 10 businesses and is a national authority on the subject.