The Secrets to Buying the Right Business For You in Today’s Economy
From the first day of your life that you enter the work force you have had a choice. And that choice has always been to either get a job or buy yourself a job. You probably didn’t look at it that way, but stand back and think about it now. If you continued on with your education, you were preparing yourself for a job. You can call it a career if you like, but in simple terms it was a job regardless if it was the president of a large manufacturing company, the local bank or an executive position on Wall Street. You still had a job with an employer. Your other choice has always been to buy yourself a job. By this statement I am referring to by either becoming an entrepreneur or buying yourself a business. Which in turn means that you have bought yourself a job.
Some people are made to have a job and work for someone or some company and do very well and are very happy or content in that position. Others would be restless in working for someone else and feel the need to make their own rules and have more control over their work place. Because we only have one of the other choices in the matter of how we spend our time you would think it would be a pretty simple decision wouldn’t you? Well sometimes it is, but here is the clincher to this situation.
People change. Change is the only constant we truly have in our lives. You may stay with the same partner for 50 years and you may stay at the same company or work in the same industry for years, but the one thing that is constant in all of this is change. People change, industries change, families change, economies change. Everything changes. And that is where the confusion and anxiety comes from. It is when the change occurs and we don’t know how to react to it. Plus a lot of the time change has a tendency to sneak up on us and before we know it. We need to change. And then we are in a reactionary mode instead of being in a responsive mode, therefore creating the anxiety and uncomfortableness that comes with change.
The change feelings that may occur in ones like can come in many different forms and have many different reactions to oneself, but the one I want to address here is the one regarding whether you get a job or buy yourself a job.
Buying or starting a business is an area that I am an expert on since I have owned 35 different businesses that I have either bought or started and probably managed to make more mistakes in the short time that I was buying, starting and selling business than most people could make in their lifetime, therefore enabling me to write and comment on this subject for your benefit.
In today’s economic climate we are experiencing a large number of people who had been employed and have had a job and their job was eliminated and they are out on the hunt to find another job. A commendable quality for them. But the chances of them finding another job is probably pretty thin, especially if they are looking to stay in the same field they were in, with the same amount of pay and in the same geographic area that they were working in before. As my old science teacher used to say. “It is very possible, but not very probable” that opportunities they will find such a position. So what are their choices? Back to what I mentioned earlier. Either they go out and find a different job or buy themselves a job.
Since I am a qualified expert on the buying oneself a job you need to take heed and review the 11 different points I have listed below. These are short, but substantive issues that you must address if you are going to be buying yourself a job and be happy and successful at it. Not following the listed information could determine you financial failure and or the cause of your personal unhappiness.
Take your time and study each of the listed areas of life and business I have described and then move forward.
I have not gone into great detail as to all of the ins and outs and intricacies of operating a business. There are plenty of books on that subject for ever particular business that is available. What I want to address and for you to think about is whether you want to or have the qualities to be the one who buys themselves a job or not. The final decision if for you to make, but by following the listed points I have made there is a very good chance of you actually making the right decision for you and your family and your future happiness, which is what it is all about.
Good luck and good hunting for the business of your dreams and enjoy the journey.
1. First decide what you like and don’t like to do.
Sounds simple, but if you don’t like cooking or working around food then why would buy a restaurant? Because you tried to justify it by saying it is really marketing and the food is only an end to the means? You can say that and part of it is true, but in the beginning you will BE working with food. So to begin with find something you like to do and gravitate in that area. Reflect on what you enjoy doing. Your hobbies. Do you enjoy working one on one with people? Old people, young people. Maybe you are tired of working with people and want to work in an indirect manner with people on a business to business level instead. This is probably one of the most crucial parts of the equation you need to address before you go any farther.
2. Where do you want to live?
Generally people want to work close to where they live. This is not always true, but for the most part it is. Are you willing to buy a business that is 1 to 2 hours away from your home and commute daily to it? Or do you want it to be across town within 5 minutes of your home? Or do you want something that involves traveling all over the country and enjoying a different setting every day?
In today’s business with an individual’s access to the internet, cell phones, web sites, asp systems on the internet, outsourcing of administrative duties and pcAnywhere you can be doing business literally around the world from your bedroom at home while never leaving home and having the perception of a large company. So your ability to reach a large audience of customers without leaving a geographic area is available to you. So if you want to live in a resort town and work across the world it is possible for you to do in today’s economy.
3. How much money do you want to make?
Don’t give the lame answer of a lot? Be definite. Determine how much you need and then add to that amount to get a realistic number. You have got to have a goal as to how much money you want to make before you set out to buy or get into a business. Before you get into a business you HAVE to know the dollar amount as to what you want to make, because without this number you will never be able to determine if the business can support that amount.
All too many times people jump into a business not having a clue as to how much money the business can really generate and then after they get into the business they are disappointed that they have invested a large amount of time and resources only to find out the business could not support them.
That is why we want to know on average how much income a business will generate before we start or buy the business and then having that number we work backwards to see if it meets our requirements of being capable to support us in our financial needs.
4. What is your risk tolerance?
Are you willing to put everything you have on the line to get into business and sink or swim or are you only wanting to put your toe in the business and try it out to see if it is for you or not. If you are not one who has a high risk tolerance then maybe you should be looking at a franchise where they already have systems in place and if you follow the tried and true program of the franchise you should be successful. But keep in mind that the more you put into the business the more you are going to get out. So if you think you can only work 20 hours a week at a business instead of devoting 60 hours a week to knowing everything there is about your business and industry there will be a difference in the results you receive from the business. Plus, if you are concerned about not wanting to lose all of your money I would suggest that you start out small with a low investment business, because you will make mistakes and you will end up paying tuition to learn the business so you might as well start out with a small investment and work your way up to a larger business later.
5. Do you buy or start a business?
When offered the difference between the two I always suggest buying an operating business. Why? Because the day you purchase an operating business you have a cash flow. It may not be the greatest cash flow in the world, but you have a cash flow and with that cash flow you have a jump start with the business and all you will need to do is to concentrate on growing the business and cash flow. Where if you start out with a new business you have nothing. Only a hope and a dream and it will be exciting, but you have no cash flow.
Buying a business is always a safer bet than starting a business. At least with buying a business the day you take the business over you have a cash flow and all you have to do is build the cash flow. Starting a business regardless how good of a franchise or idea it may be you are starting with zero and when you start at zero it can take a long time to get to breakeven let alone profitability.
6. What is the upside to the business?
If you are buying an existing business you need to know if there is an upside to the business. In other words is the present business owner getting all there is out of the business or have they been lazy and not advertised or marketed the business and not paid attention to it and all it needs is your attention. Do your due diligence and check out the business and chances are the present owner of the business has gotten tired and burnt out and left a lot of opportunity in the business.
You never want to buy a business that has no upside to it. Sometimes there will not be any upside to a business, because the previous owner has owned it for so long and ran it so well that you can never duplicate their business model. Sometimes there is no upside to a business, because the industry has changed. One does not want to be selling horse whips, when cars were first coming onto the scene.
Check the competition of the business. Generally speaking regardless if you are buying an existing business or starting a business the success of the business if going to be determined by the amount of competition you have. Very simple to find and very definite the reason for the success or failure of the business.
7. Where do I find a good business to buy?
Good businesses are hard to find. There are many of businesses for sale on the internet on business for sale web sites like bizbuysell.com, businesssesforsale.com, bizquest.com, AmericanBusinessBrokers.com and dozens of other web sites. But some of the best businesses you could buy are not on the internet. They are being run by their present business owners and all that is needed is for them to be asked. Yes, just ask. Once you have determined what kind of business you want to be in and where you want to be, then start asking around with the present business owners if they have every considered selling their business. You will be surprised that there are many business owners that would like to sell their business, but don’t know how to or have just been putting it off and all they are needed is to be asked. Take it upon yourself to ask and if they are not interested in selling their business you will at least get a preview and education of the business is all about.
8. How do know what a business is worth after you find it?
Valuation is one of the toughest things about buying a business. ALL sellers think their business is worth more than what it really is. It is just human nature and you are not going to change that. Part of the valuation process is going to be decided as to what kind of buyer you are. By that I mean are you looking to buy yourself a job or are you looking to buy a business to sell in a few years? It makes a difference when it comes time to buy. If your goal is to buy yourself a job and expect to keep the business for quite some time then you can afford to pay a little extra for the business. But if you are planning on buying a business and then selling it in a few years you have to make sure that you get it as cheap as possible so that you will have a larger profit margin when it comes time to sell. There are several different ways to determine the value of the business. One is to hire business valuation consultant and have them review the numbers and quality of the business. Another way is to purchase the book “The Business Reference Guide” by Tom West, which lists hundreds of different business and what the general rule of thumb of valuation for each of these businesses is. It is the same book that is used by business brokers when valuing businesses. And another way is to hire a knowledgeable business broker and pay him to do the valuation for you. But make sure they are an experienced business broker and are not going to school on you.
9. Do you have the money or where do you get the money?
Depending on the total cost of the business and if it has a good cash flow stream you will be able to find the money. A lot of businesses are still being sold with the seller doing owner financing or at least partial owner financing and I suggest to buyers that they look for this kind of arrangement. Because, if the seller is willing to finance part of the sale they are electing to remain a part of the business and are your partner until you can get them paid off and they will be more willing to take your phone calls or offer advice if you still owe them money. Local banks are the next choice for getting money to purchase a business. They will be very conservative and probably only want to loan on a business that has real estate included as opposed to a Subway or something that is in a leased space with very little in the form of hard assets for them to collator, but they will probably loan in the 60% to 70% of the total sale price of the business. However, you get the money whether it is from your savings, relatives, friends, or banks get the money so you can get into the game so to speak. Once you get into the game and own your own business all of the banks, relatives, friends etc… will treat you differently, because you are now a business person. It may sound weird, but it is true.
10. When do you buy the business in today’s economy?
As soon as you find the right one. It is not all about the price. Sure price is important, but the quality of the business, location, industry of the business, whether you like it or not and especially if you are going to be staying in the business for a while are more important than the price. Of course you don’t want to over pay above the market price and end up behind the eight ball right from the start, but when you find it. Buy it. Don’t get caught up in the small details of trying to save a ½ point on the financing or a few thousand dollars on the purchase price. Your goal is to get into business and stay in business and make a profit. Until you get into the game you are nothing more than a wanta-be who is setting on the sidelines talking about. I don’t care if you have hundreds of thousands of dollars in the bank. Until you get into the game of business you just a wanta-be on the outside looking in.
11. Bonus Tip.
DO NOT search for the perfect business. Why? Because there is no such animal. All businesses will have some warts on them and what you are looking for is a business that will meet your general needs and wants. Just like in friends, spouses, co-workers there are no perfect people or perfect businesses so you might as well accept this fact before you begin your search.
People have a natural tendency to look for and talk about the things that are wrong about a person or a thing. Become a good finder and look for the things that are good about the business and how many of the points I have listed here that meet your criteria and then go forward. Nobody bats 100% and you won’t either. But by following my list of what to look for in the buying or starting of a business you will come much closer to your goal of having an enjoyable journey in your life as a business owner.