I Think I Want to Buy a Business. Where do I start?

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I Think I Want to Buy a Business.  Where do I start?
If you are reading this, you are starting in the right place!  Knowledge is power, and you are getting more educated about the marketplace, the process, and the risks and rewards of owning your own business. This website is a place where you can see businesses for sale in a marketplace-like setting, and do some window-shopping.  This lets you know what kind of businesses are out there--- many of which will be a total surprise to you – and to see which ones seem to call out to you as a match for your needs and desires. We will discuss analyzing and evaluating businesses in several other blogs.
Buying a business requires you to make many decisions.  While you are window-shopping, you should also be assessing yourself, asking some very important questions about you and your significant other, as this will affect the couple and family as well, like many life decisions.  These are key areas of self- exploration:
1. Motivation
2. Skill Set
3. Passion
4. Financial Resources
5. Risk Tolerance
1. What is your motivation?  The most common responses are:
  • I want to control my own destiny.
  • I always wanted to own my own business.
  • I can make more money for myself and my family, instead of for someone else.
  • I have no other good options for work that suit me and my family.
  •  I feel it is the next natural step in my business life; I have the skills and financial ability to do it.
You should know yourself before committing in earnest to your business acquisition project.   If you are still looking for a J-O-B, and just killing time here, you are probably not ready. You will know when the time is right.
2. What is your Skill Set? Most small businesses are owner-operated, especially in the early years. To have a successful transition, and generally to finance the transaction, you will need some relevant experience.  This does not mean that you have to work in exactly the same industry. It does mean that if a special trade license is required, it will be tough the buy the business.  If the operation thrives on business to business (known as B2B) marketing, and you “hate marketing,” this may not be for you.
Think about what kind of tasks you have performed, roles you have filled:  what have you previously done well and enjoyed enough to do a lot more?  What skills, like managing people, hiring, recruiting, sales, production, operations, bookkeeping, customer relations, purchasing, may transfer to a business in an entirely different industry?
One of the big differences in owning your own business VS working for someone else is that the business owner often has to wear many hats, multi-task, and make quick decisions.  The budget is met without help from “upstairs;” resources—people and cash—may be more limited.  No asking the boss to release additional funds; you ARE the boss, and you need to make payroll.
3. What are you passionate about?  Yes, it really does matter.  Life in a small business will be very tough if you have to work every day at something that means nothing to you.  Get down to analyzing the numbers for accuracy AFTER you say “Yes, I can see myself doing that.” (while smiling about it)
4. What does your financial picture look like?  Fully understand what it will take to complete a purchase (and run the business) for a deal of the size you are considering.  We will discuss sources of funds in other blogs.  Deal terms will also heavily influence how much liquidity and collateral you may need. Undercapitalization (a big word for not having enough liquid cash to run the business) is one of the biggest causes of failure in businesses.
5. What is your risk tolerance?  There is a continuum of risk tolerance (often associated with commensurate rewards, but not always.)  There are many and varied advantages and disadvantages associated with each choice in “having your own business.”  We will explore these in more depth in later blogs.  I see the continuum as follows, with a Franchise offering a “guidebook/pattern for business operations, on the low end and buying into a business with/as a partner as the riskiest new business model:

You will likely have some answers and more questions now.  That’s part of getting educated. You may also want to start with lining up professional assistance to help you avoid the pitfalls of doing it yourself.  That’s what experts are for, after all:  to fill in the gaps in our personal experience and capabilities. Who do you need?  We will talk some more about that, too.
For now, take your self-assessment and go shopping on this site for some businesses that intrigue you. 
Here’s to your success!  KAP
  • Author: Kathryne Pusch
  • Date: November 28, 2016
  • Category: Buying a Franchise or Business
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