Rick Jordan - Be Careful When Helping Friends

BIO: Rick is the Founder & CEO of ReachOut Technology, which just had its initial public offering. He appears on global media and speaks on stages across the United States as an inspirational speaker, cybersecurity expert, and mindset motivator. STORY: Rick wanted to bail out a struggling friend, so he offered to buy his business. Unfortunately, he didn’t have a legal structure during the acquisition to include a non-compete clause. Six months later, his friend started another company and took back the clients Rick had acquired from the sale. LEARNING: Get the proper legal structure when buying a business. Refrain from letting emotion drive your decisions when investing. There’s no such thing as a bad asset, just a bad price.  “I think business partners can become friends, but I don’t think friends can become business partners.”Rick Jordan  Guest profile Rick Jordan is a magnetic personality who constantly appears on global media and speaks on stages across the United States as an inspirational speaker, cybersecurity expert, and mindset motivator. Rick is the Founder & CEO of ReachOut Technology, which just had its initial public offering. In his free time, Rick is the host of the popular podcast ALL IN with Rick Jordan.Worst investment ever Rick’s longtime friend struggled in business, making about $150,000 in revenue annually before expenses. He requested Rick to take out a loan for him, but Rick felt this wasn’t the best way to approach the problem because his friend wasn’t in a position to afford to pay the loan. Instead, he advised him to sell his business and get into employment. Rick even offered to buy the company. His friend agreed to the proposal. Rick’s first mistake when getting into this deal was overvaluing his friend’s business. The second mistake was letting emotions drive his decision when he valued the company. Being his friend, there was an emotional attachment to Rick’s decision. Rick believed he would take on his friend’s client base and triple the revenue in no time. The excitement to get the ball rolling saw Rick make his third mistake. Rick didn’t get solid business acquisition documentation in place. He just had a very simple contract to purchase the business assets. No absolute non-compete clause was listed within this document. As a result, six months later, his friend returned to business under a different name and took back all the customers Rick had acquired during the purchase.Lessons learnedBe careful when valuing a business.Get the proper legal structure when buying a business.Refrain from letting emotion drive your decisions when investing.Friends typically don’t make good business partners or business associates. Andrew’s takeawaysTo produce tangible evidence that you have a sustainable business, you need to get between $3 to $5 million in revenue.You need consistent growth in profits.To be successful in business, your number one goal should be to pay a dividend.There’s no such thing as a bad asset, just a bad price.If you’re a business manager, and you have an opportunity to help a friend, stop. Your obligation is to help your customers, employees, and shareholders. Actionable advice Read The...