Risk

Question 1

Things to consider when buying a business.

Answer 1

• Once you own a business, it can take years to sell it.
• You will no longer be covered by employment benefits.
• You will need to buy your own health, drug, dental plans.
• Unless you plan properly, business activities could threaten your personal assets.
• All businesses are on the path to obsolescence.
• You can become the victim of fraud.

Question 2

What is Exter’s theory on risky assets in times of crisis?

Answer 2

In times of crisis, Exter’s theory was that people would try to migrate wealth from riskier assets to the less risky assets

The bottom-most point being the asset with the least risk.

Question 3

What is the purpose of a business?

Answer 3

The business must work for you and generate a cash flow that can be redirected into less risky asset classes.
If the business is not producing this cash flow it is a job, not a business.
If the business is not producing a market wage for you, it is a hobby, not a business.

Question 4

Things to consider about obsolescence.

Answer 4

• The business must make money for you in the present.
• All businesses are on the path to obsolescence.
• Technology, governement, or competition can kill a business at any time.
• Do not defer profit taking indefinitely trying to ‘build something’