July 16, 2020
With the V-shaped recovery that the markets have experienced over the last few months, I’m hearing a lot of what-ifs from friends and family. They keep replaying their decision not to invest everything they had when the market was “clearly” at the bottom. They felt like they missed out on a once in a lifetime opportunity to get rich, especially when they watch a name like Tesla go from $360 in March 2020 to over $1500 in July 2020.
Personally, I’ve had more than a couple “once in a lifetime” chances slip through my hands. The one that I continue to replay, even today, was an opportunity to purchase a business a few years ago. The deal fell apart when we were finalizing the last few details. The seller desired a quick deal and the lending institution slowed the process to the point that it no longer aligned with the seller’s timeline. The deal ended up dying. Had I moved faster, then I could have made the purchase, had a very profitable company and realised the capital gains. It was my once in a lifetime opportunity to buy a company that was growing, profitable and extremely aligned to my goals. Losing that stung.
Looking back, though, I now see that not only did my business and wealth survive that deal, but it also set me up to find the next one — and be better suited to quickly close. I’ve also learned in the process, that there’s no such thing as a “once in a lifetime opportunity” if you have your finances set up to take advantage, the next time you see a depleted asset on the market. Or a woefully cheap stock. Or a business that can be so much more than it’s today.
If you feel like you missed out on such an investment, as the market recovered from Covid, here’s what to do to prepare your finances for the next time that chance — even if it looks different than today — comes around.
One of the big reasons the business opportunity slipped through my fingers was because I had not properly kept up with all my assets to ensure flexibility when the chance reared. At the time of purchase, I had to liquidate some assets, evaluate others for borrowing and collect debts to fund it. These things take time and it’s time I did not have in this case.
I didn’t expect this opportunity to come along and I had become a bit complacent in my financial process. I had some assets I wanted to sell, but I hadn’t taken necessary steps to do so. Also, I had some outstanding debts that I should have collected more aggressively, but I didn’t ‘need’ the money immediately so I kept putting it off. Not only that, but I had other assets I could borrow against should I need it, but I had not gone through the application process. This would have freed up capital quickly, the moment I needed it.
While in many cases I would have been fine without these measures, the inability to tap these sources of funds was why I lost out on buying the company.
Ever since this time, I’ve tried to optimize my access to cash. To do so, I’m diligent at selling underutilized assets, opening lines of credit, just in case, and always keeping outstanding debts owed to me at a minimum. This gives me the flexibility to act fast. The ability to act fast gives me access to better deals.
One of the big upsides to missing out on a can’t miss opportunity is it’s a trial-by-fire learning experience, providing you with the knowledge of the purchasing process moving forward.
Take the simplistic example of purchasing Tesla at its 2020 trough. You know, in order to secure the investment moving forward, you need to open and fund an investment account. You also need to know how to purchase the stock and who your intermediaries are in that process. You also now know, when you see an amazing deal in the market, it’s only relevant if you actually purchase the name at its lows.
It’s a very simplistic example of learning from the past. In the failed business purchase, I learned the due diligence process for a company the size I was trying to buy. I learned the best way to structure this deal from a legal and financial perspective. And I learned who the stakeholders involved would be if such a deal ever came back around. Knowing who would sign off on the purchase and what information they needed to process their part becomes a key factor in the speed of the deal.
When you miss out on your once in a lifetime opportunity, you learn so much about the process to complete a similar deal in the future, which makes it far more likely that the next time around, you won’t miss out. You now know what makes the chance look good to different parties and who to approach at what point of the process. You now have an outline to success.
That outline is how you can ensure what you thought was once in a lifetime is actually something you can find and secure multiple times in your career.
When I went through the purchase process, I dealt closely with members of my network allowing me to see who helped and who slowed the deal down. I found issues with some in my network who slowed the process to work at their pace, or failed to provide the right advice when issues arose outside their expertise.
When you work with talented professionals, they work on your timeframe and find you the right talent, when needed.
Having access to the right network of professionals becomes a huge advantage in future opportunities. When you go through a purchase process, for example, with a strong network in place, then you’re not scrambling to find the right talent at the moment when you need the help, insight, or skill. Instead you have a direct line to exactly who you need and they have an idea who you are and what you can act on (and what you can’t).
Even in a failed deal, like in my opportunity, you develop new relationships, which can benefit you later. You also develop deeper connections with the network you already have. You learn how they handle pressure and what they’re particularly adept at. And they learn about your finances, risk tolerance and what they believe you’re capable of achieving (from a financial standpoint). The increased communication and knowledge about your finances and goals increases their ability to help you in future deals.
Truth is, there’s no such thing as a "once in a lifetime" deal or opportunity. There are amazing deals that sometimes hurt when you’re not able to close on it, for one reason or another. But, remember, when that happens, it’s only increasing your chances for successfully closing on the next opportunity that flashes similar valuation metrics. The best method of recovering from a lost investment is to prepare for the next one. In time, you’ll find your next once in a lifetime deal. If you’re able to close it, then I bet a few more will soon follow.
By Timm McLean, MBA |
CEO at WLTH