How to Choose a Great Business to Buy
Jul 30
You’ll come up with a great deal of questions when you begin actively pursuing purchasing a business. At present, you may feel that these questions alone represent an intimidating enough proposition, but additional attention at this point will aid you in deciding on the enterprise that’s best for you, and provide you with the best opportunity for becoming one of those unusually rare individuals who actually becomes a truly successful entrepreneur.
One of the first things that you need to do is to take a long hard look at yourself. What are your strengths and weaknesses? You should identify the weaknesses first – given how crucial these particular factors are, along with how you could go about dealing with and conquering them, and whether or not they are significant enough to “stop the show” when it comes to the areas of business you’re considering becoming involved with. You will need to understand that to own a business requires a multitude of talents, some of which may be natural, others may need to be acquired and still more will dictate that you turn to professionals and advisers for assistance.
Ask yourself whether you are comfortable dealing with the wants and needs of numerous customers or have the ability to interact with a very wide range of personalities. Do you like interacting with people? Or would you prefer operating a business which has a relatively small number of clients who represent a much more significant source of income between them?
When it comes to dealing with people, would you be happy handling a large number of employees, who themselves have their own wants and needs, schedules and problems? It may be that you would be happier in a one or two-person environment.
How many hours a day are you ready to give to the business? When you own a business, the experience can very often be around-the-clock, and some retail enterprises have lengthy operating hours by their very nature. Would you prefer a 9 to 5 obligation?
Another important question to ask yourself – would you prefer a product or service based business? At this stage you should ask yourself whether you are happy handling large amounts of inventory or whether you would prefer to deal in a more intangible way.
Take a look at your strengths and weaknesses, again. Identify your areas of familiarity and whether you know a particular industry better than others. You may already be an expert within a particular niche, and when buying a business you should try and exploit every advantage that you have. Is there a specific industry that you’re exceptionally thrilled about? It almost goes without saying that you should stay away from an industry that you don’t have any interest in, or dislike all together. Within your current and former careers, is there a particular position that suited you best? If you are naturally good at one role or the other, seek to buy a business that enables you to capitalize on this position.
Many people advise against this, but you could consider turning your hobby into a business. On the one hand, you will be especially motivated if this is something that you really like to do. Some would advocate that additional stresses and pressures involved when you own a business based on your erstwhile hobby will quickly lead to you losing the interest and passion that existed before. However, rarely does a hobby qualify you to run that type of business and so making sure you have the right skills to be successful are far more important than having a passion for the product. After all, it is the profit, not the product, that pays the bills and builds value when you buy a business.
How much money do you have to invest, or how much money do you have access to? Value a business or two and ask yourself whether you would be happier buying a struggling and maybe undervalued business, using your particular skills and time to turn the enterprise around, or whether you are looking for a steady business that is profitable right now.
The right business is the one that meets all your criteria and you should be enthusiastic and passionate about your final selection. Make sure that you bring in trusted accountants and financial advisors, never let your heart rule your head during the decision-making process and buy a business that is right for you, for the long haul.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.