A searcher's honest account of buying a business and losing it: worth watching before you sign anything
I came across this video from @redacted, "Bankrupt at 40 (How Buying a Business Cost Me Everything)", and I think every aspiring searcher and current searcher should watch it.
redacted
Most of the content in our space celebrates closed deals and successful exits. Jed gives the other side: what it looks like when an acquisition goes wrong, and what that does to the person who signed the personal guarantee.
Here is why I think it's worth your time:
- Survivorship bias. We mostly hear from the searchers it worked out for. Hearing from someone who did real diligence and still got hurt makes you underwrite risk more honestly.
- The downside case. It's a useful prompt to ask yourself whether you could survive the worst case, not only whether the deal pencils in the base case.
- Personal guarantees and leverage. Debt sized to maximize returns also maximizes default risk. Know what you're personally on the hook for.
I'd be interested in how others here stress-test their deals. What would you do differently after watching this? And if you've been through a deal that didn't work out, what did you learn?