Buying a Business | Useful Information
Buying The Right Business…
Over 90% of the people who begin the search to buy a business never actually buy a business. To avoid ending up in the 90% category, you must acquire the right knowledge to undertake this task. Furthermore, the only way to ensure that you will be successful in the business is to buy the right one, which takes time, effort and diligence.
If you feel concerned, don’t be, most people have little idea of what business is right for them. Which is where 2Transition comes in to assist with education and learning. It might seem a daunting task, but with the right counseling and guidance, you could be a business owner and make your dream come true.
But, how do you know which business is right for you? Well, here are well-tried and proven techniques to help you determine this:
Develop your Criteria...
Create a list of critical factors that any business you buy must possess. Be specific, don't say: "I have to enjoy what I do"...yes that's important, but, if you're in a business you're going to love, it can’t be losing money, otherwise you’ll loathe everyday in the business!
Here are five critical questions to be asked for any business before buying:
• Is the business sales and market driven?
• Does the business have a clearly defined point of differentiation
•Does the product or service posses high margins?
• Is there a demand for the product or service?
• Does the product or service compete on the basis of price?
These are the five basic questions. Your list will likely change in light of experience, but it’s important too ask the basic questions first. As you conduct your research, along with visiting different businesses and speaking with many sellers, your discoveries will lead to modifications to your list. However, getting this list down solidly as soon as possible is essential to your success!
What Do You Do Best?
It’s tough to answer, we know, but you have to honestly assess your true strengths and weaknesses. What are you skills and attributes? Don't fool yourself and assume you can do things you have no background, training or experience for…be honest with yourself. Whatever it is that you do best, whether sales, marketing, operations, etc, it must be the single most important factor for driving the revenue and profits of any business you consider buying.
As any good business owner will tell you, don't put yourself in a position where if one employee leaves, you're in serious trouble. Your skills and talents must carry the business in terms of management ability and strategy.
The right business is one where you will thrive from your strengths, not suffer from your weaknesses. If you can't, then there's no way that you can be successful. The business that you choose has to be one that you'll be proud to own. Look at yourself long and hard and picture yourself in that business.
It’s all about the Profits…
Many buyers dream exciting things about the business and they have delusions about what can realistically be achieved. Do not fall in love with the product; rather, it’s the profits, which are key and the lifestyle that it can deliver to you. The product that the business sells, or the service that it offers, is not really significant in the grand scheme. If the business does not produce the desired income or provide a satisfactory return on your investment, then, you will quickly tire of the product.
Alternatively, a boring product line can become very attractive if the business is growing and you're enjoying the work.
Focus, Focus, Focus…
The many buyers we deal with all say it can be very discouraging searching for the right business, and we agree. But, don't become overwhelmed. If you use a process and a methodology to conduct your search it will become like second nature to you in evaluating business opportunities. Use the simple techniques to eliminate the businesses that you don't want. Pay attention to the profits when searching through listings. However, sometimes there are businesses that on the surface are not profitable, but are really jewels to be mined. This can occur where an owner may have allowed his business to run down due to an illness, but the fundamentals of the business are still there. All it needs are some special turnaround talents and the business can be restored to its former glory. Always keep this in mind and constantly ask questions about the financial structure…you never know when you’ll find a diamond in the rough.
Good hunting.