If you are new to the world of buying a business, or even if you’re a seasoned entrepreneurial veteran, one of the first decisions you will need to make is what type of business you want to buy.
Notice that we used the word “want” here. Many budding entrepreneurs have a dream business in their minds, but that dream business might be in an industry that would mean a slim chance of success.
What do we mean by that? We’ll use the classic bar example.
An accountant always dreamed of owning their own bar – but since this accountant has never worked so much as a day in the restaurant industry, buying that bar would be a gigantic mistake. Anyone who has work history knows that each industry and each business require their own unique set of skills in order to be successful. Making such a big change without the practical knowledge of what’s ahead can only lead to massive issues.
Drastically changing industries without understanding what you’re in for can be very problematic. An accountant is probably used to working the typical 9 to 5, Monday through Friday gig – so they might have big problems switching to the long hours and long nights required to operate a bar. There are many nuances in each industry. If you don’t have the experience to understand those nuances (like the long hours example) you are setting yourself up for failure.
Another big roadblock for new buyers trying to enter an industry with no experience comes from the c0ommercial landlord. If you have zero restaurant experience, then a commercial landlord/property manager is not going to rent you a space where a working restaurant is bringing them revenue. If the restaurant fails due to your lack of experience, they won’t get any rent. You will have to prove to any landlord that you have the practical knowledge necessary to sustain the business.
But I want to buy my own business because I want to get out of a rut and try something new!
This motivation for purchasing a business is fine, you just need to focus your search on businesses where you have some chance of success. No one wants to buy a business just to drive it into the ground.
But I’ve only ever had just one career!
Practical experience doesn’t necessarily have to come from previous jobs. If you are an accountant who has spent the last 20 years taking art classes and volunteering to help with gallery openings in your spare time, then purchasing an art gallery wouldn’t necessarily be a bad idea.
The point here is to have a serious talk with your business broker about what industries will/won’t work for your both your practical experience and goals – and then listen to their advice. If they tell you buying a bar is a terrible idea, then it probably is.
Your broker wants you to be successful because they hope you will use them again when the time comes to sell, and because a very large part of a good broker’s business comes from referrals from happy clients. You will not be a happy client if your broker doesn’t help you find a business that you can’t maintain.
Think about what you are passionate about, what your goals are and also what types of practical experience you would bring to the table. Then find businesses that fit that mold, and you will be well on your way to entrepreneurial success.
Do you have an “I bought a business I knew nothing about.” horror story? Do you have questions about what industries would be right for you? Share your stories and questions here, and we would be happy to help you find the right business.