Quite often buying a business makes more sense than starting one! An existing business will, hopefully, already have a head start; the groundwork done, a healthy customer base, in profit with potential for expansion.
Irrespective of the business’ viability you first have to address the, oft overlooked, question:
- Am I cut out run a business?
The perpetuated myth that ‘the self-employed are answerable to no one and can come and go, and do, as they please’, is somewhat of a misnomer. Running a business can be hard, often frustrating, tedious, work; long hours, little respite and, at times quite disheartening.
No paid leave, no paid maternity leave, tax and VAT returns, Health and Safety, Trading Standards, fire regulations, public liability … shall I go on?
Running a business involves a rollercoaster of emotions, and a plethora of red tape; a business requires 100% ‘eyes open’ commitment.
Beware the Hobby Horse
Remember, a business is a business, it is not an extension of a hobby. If you have a hobby that you wish to expand into a business then you’ll have to change your perceptions. The hobby must become the business; you must provide what customers want and not that which gives you most gratification.
Running a business is a lifestyle choice. It will put pressures on your family, so you’ll need to take them into account; do not make decisions without their support! Your success and failures will affect your loved ones directly.
So, do you feel up for the challenge? Read on.
- Do the figures add up?
Well, I’ve been there done that, seen a business, fell in love and plunged in. Oh dear, dear, dear … in fact so dear as to be almost disastrous.
Do not become beguiled by the business’ apparent success; nor its appeal as ‘something you’ve always wanted to do’.
Get the financial facts, the last three years accountants figures; they will reveal the profitability and trend of the business. Have these figures checked out by a qualified financial authority; your lender, if you have one, will insist on a third party interpretation of the ‘facts’.
At the end of the day, like it or not, it’s all about the money. You have to look at the present figures and consider the future prospects for the particular business you have an interest in. Will there be a market for your product or service in five years’ time?
Who’d have thought vinyl records would have been replaced by CD’s that were then squeezed by digital online streaming?
This brings me to my final point.
- Why is the seller selling?
The first question a buyer will ask, or should ask, is ‘why are you selling?’
In my case, quite recently, I sold my last business as the consequence of poor health. A genuine reason for selling a viable business. Sometimes, and I suppose this applies to me, the seller has just ‘had enough’, time to wind down and let a younger entrepreneur take up the baton. Fair enough.
Ask questions of the seller, lots of them! It could be that he or she knows something about the market, something that may cause a sudden downturn in trade.
Do your research, is there a competitor about to start up in direct opposition? Is their new technology on the horizon? Technology that could deliver cut price competition, or, at the very least, require more investment from you in order to retain a viable trading capacity.
Be cautious, singlemindedness, a laudable quality few have, is however, without research and planning, much akin to stupidity.
Nevertheless, stay positive; keep an open mind and a balanced take on the businesses’ potential. With a good business plan, keen marketing and a modicum of 100% effort, your new business could produce well beyond your wildest dreams.