Sometimes it seems like a good idea. A hard about-face in life. Choosing to buy a business in an industry that interests you, but one where you’ve never spent a single, solitary second. How exciting, right? A whole new chapter of life – a new adventure.
Don’t do it. Here’s why.
Life as a business owner is tough. Really tough. It’s long hours, lots of responsibility and constant challenges. That toughness translates into rewards if you have the grit, experience and passion to be a successful entrepreneur. Notice we included the word experience. We’re not saying you need to have owned a business before. The romantic notion that the only requirements for success as a business owner are grit and passion just isn’t reality.
The reality is taking over a small business as the new owner comes with a sharp and steep learning curve. There are so many aspects of owning and running your new business that you will have to learn – quickly. How the operating procedures work and why they are the way they are. The nuances of your new staff. What needs to be where and when. How to place orders. How to manage inventory. How to stay on top of licenses, taxes, payroll. The list is long. What you don’t need in this mix is trying to learn an entirely new industry. If you want to be successful you’re going to have an exponentially easier time taking over a business where you have some real, practical experience.
Here’s an example. Say you went to school to be an accountant, then you spent some time working as the accountant for a small manufacturing company. Like most people you’re a fan of a good happy hour and have always had a daydream of owning a tiki bar on the beach. When a 200 seat beach bar near you goes up for sale, you put in an offer and are able to work out a purchase contact with the seller. After closing on the sale you struggle with your now 24/7 work schedule. You’ve never worked anything but a classic 9 to 5, so having to open the bar at 10am and stay until 3am every day is rough. The huge staff you’ve inherited to run this large establishment are a constant source of drama you’ve never had to contend with. You fire one employee and then 9 more quit, including your weekend bar back. Now you’re juggling trying to fill the schedule and trying to hire someone who will actually show up to be the bar back on Saturday nights. So for 5 Saturday nights in a row you’re the one hauling kegs and refilling ice. And you didn’t realize how fast you’d go through lemons so you’re driving around at 4am looking for a 24 hour grocery store because there isn’t any time to order from your vendor and get lemons by tomorrow. Then your line cook calls in sick so you have to jump in and work the line for 3 days, cooking food you’ve never cooked at what seems an insane pace – much to the displeasure of your customers who keep sending the food back.
If you’re someone who has experience in the restaurant industry, that scenario probably seems pretty normal. You know what it’s like to work late shifts and have to jump in and cover for people who’ve called in that night. You’re familiar with the drama that exists in every food industry staff. You understand that a 200 seat anything is huge, and not for anyone who’s a rookie. You know what food cost is and you understand what a bar needs (lemons) to function properly.
The point here is you really need to know what you’re getting into before you make the life-altering decision to buy a business. The only way to really know what owing a business is going to be like is by working in that industry at some point in your life. Our accountant from the example above could have bought a small manufacturing business or a small accounting firm and done quite well. Instead they are immediately overwhelmed and quickly burned out.
Don’t do this to yourself. Talk to a business broker about the practical experience and education you have. You might be surprised by the business and industry options available that would compliment the things you’ve done in the past. Set yourself up for success, not burnout.
Are you rethinking buying a business you know nothing about and want to know what industries and businesses would fit with your experience? Did you buy a business cold and have a story to share? Contact us or leave any questions or comments, we would be happy to help.