ADVISORY IN PRACTICE 

The Purchase Price Wasn’t the Most Important Number 

Recently, a client came to me for help evaluating his next business. 

He already owned a successful company, but changes in his industry made him want to diversify. His goal wasn’t simply to make more money. He wanted to build another source of income that could eventually operate without requiring all of his time. 

At first, he was considering buying an existing cleaning business. Then he found two programs that promised to help him start a cleaning company from the ground up. 

Three opportunities—but not three versions of the same thing 

Suddenly, we weren’t comparing similar opportunities. We were comparing three very different things: 

• An existing business with customers, contractors, and operating history 
• A startup system that included help building the business 
• A coaching program that would teach him how to build and operate it himself 

Each opportunity was presented differently. Each had attractive projections. And each required a different combination of money, time, risk, and trust. 

For this, my role wasn’t to choose for him. My role was to help him slow the decision down long enough to understand what he was buying. 

A lower price does not always mean lower risk 

The existing business required the largest financial commitment, but it also had customers and revenue. 

The startup programs had much smaller purchase prices. That made them appear less risky at first. But the program fee was only the beginning. We also needed to consider advertising, software, insurance, recruiting and testing service providers, refunds and rework, customer service, working capital, management help, and the owner’s time. 

One program suggested that $10,000 in monthly revenue could produce approximately $4,000 in profit. But when we subtracted the costs the company itself provided, only about $2,900 remained—and that was before several normal business expenses. 

That didn’t necessarily mean it was a bad opportunity. It meant the profit claim needed more support. The purchase price was easily advertised to us. The true cost of setting up the business needed to be discovered. 

“Semi-absentee” depends on who is doing the work 

My client was very clear: he did not want to create another full-time job for himself. 

Someone still had to respond to leads, close sales, recruit cleaners, manage schedules, handle complaints, monitor quality, and solve problems when someone failed to show up. Software could help organize the work, but software would not manage the business. 

The business may eventually run without him, but someone must handle the day-to-day work while it is getting started. 

A guarantee is only as strong as its details 

One of the programs offered a $10,000 profit guarantee. That sounded impressive until we looked more closely. 

At first, it wasn’t clear whether the guarantee meant $10,000 in monthly profit or $10,000 in total profit during the first six months. Those are two very different things. 

The guarantee also came with requirements. My client had to follow their program, attend the meetings, spend the required amount on advertising, and respond to the leads. If he didn’t do those things, the guarantee might not apply. 

This is why seeing the written agreement is so important.  What sounds great during a sales call can look very different when you read the details. 

We kept coming back to four practical questions 

1. How much money will this really require? 
2. How much of the owner’s time will it take? 
3. After paying every expense—and accounting for the owner’s work—what profit is actually left? 
4. What happens if sales develop more slowly than expected? 

These questions did not give my client a simple yes or no. They gave him a clearer view of the decision. 

He ultimately chose the coaching program and began building the company. Once he paid the upfront cost, the program moved quickly to put the foundation in place, including the website, CRM, Google account, and assistance with the initial business setup. In our most recent conversation, he told me how impressed he was with the speed of the onboarding process. 

Advisory is not about making the client’s decision 

It’s easy to think that my job would be to say my preference. But it is his money, his time, and his business – His decision. 

My job was to help him look past the excitement and understand what he was really committing to—before he spent the money. 

That’s what financial advisory should do. It isn’t about talking a business owner out of taking a chance. It’s about helping them understand the risk, take a calculated risk, and know which numbers will tell them if the decision is working. 

Sometimes the most important number is not the purchase price. It is the amount of money, time, and operating responsibility required after the purchase is made.