We get it. Once you’ve decided that you are ready to make the leap and buy a business it can be hard to keep from going directly to the shopping phase. It’s fun to look at business listings and envision yourself as the owner. Guess what? Shopping for businesses in this way is unproductive and ultimately won’t get you what you’re hoping for from business ownership.
Any business, large or small, can be condensed down to one major thing. A business is cash flow. You are providing goods or services that you pay for and then your customers pay you. It’s the money in and money out that makes a business successful, and hopefully you’re making more than you’re spending.
If a business is essentially just cash flow it really doesn’t matter what color the walls are. Looking at pictures of businesses on the internet isn’t telling you much of the story. Neither is perusing vague P&L statements.
What you really need to know about a business is does it generate (or have the potential to generate) the amount of cash flow I need to live day to day as the owner – and is it possible for me to be successful in this industry.
How do you figure that out? Research and questions.
Research the areas where you’d like your business to be. Can you afford to live there? How much would you need to make to have that be possible? Will the area work for you and your family? If you’d love to live on the beach, but your target area has zero schools for your kids you might need to redirect your target area.
Research the different industry sectors possible in that area. Do you have any practical experience or education that would make a particular industry better for you than another? Will the industries available in your target area match with your skills? If you’ve always wanted to own a big restaurant but have never spent a single day in the restaurant industry, then looking at food service industry business is likely a mistake.
Once you’ve done some research, start asking questions. Have a conversation with an experienced and qualified business broker about the areas you’re considering, your practical experience and education, your goals for business ownership and the amount of capital you have to invest. Ask lots of questions – about the area, about the industries that do well in that area, about what types of businesses would both fit with your experience and with what you hope to get out of owning your own business.
Notice something? So far we haven’t said “look at listings” because it isn’t helpful until you know where you want to be and what you need to be successful.
Don’t waste a ton of time scouring the internet for your future business. Do some research and then get in touch with a business broker.
Do you have questions about the process to buy a business? Would you like to know what types of businesses would match your practical experience? Ask us! Leave any questions or comments and we would be happy to help.