When you first start searching for a business to buy you might have an idea in your head of what that business will look like. In your mind the location is perfect, the windows are clean and everything is new and organized. When you are shopping for something like a house or a car this is often the case – as a clean home shows much more successfully than a dirty one. In the small business market, however, this expectation of perfection is going to be problematic.
Most small businesses are a mess because a small business is complex by nature. Sure, the parts that the customer sees are usually tidy – but walk into most back offices, kitchens, garages – and the reality will show itself. And the mess might not be just physical. As you start to peel back the layers on most small businesses problems will spill out. There might be interpersonal issues with the staff. The financial records might be an unorganized disaster. You get the idea.
Here’s the good news. If your first impression isn’t great it doesn’t mean it’s not a great business. It just means you need to dig a little deeper to see if the mess that’s in front of you is something manageable or something you aren’t going to want.
Here’s a few examples:
You walk in and it’s ugly.
The equipment is really old. The décor is really dated. The vehicles look worn out. When your first aesthetic impression of the physical parts of a business isn’t great, it doesn’t necessarily mean the business itself is bad or doesn’t make money. Instead of instantly deciding the business isn’t up to par – ask why the current owner keeps things the way they are. To you the outdated décor in a café isn’t appealing, but perhaps it’s the old school charm that keeps the loyal clientele coming back. The vehicles might look worn out, but upon further inquiry you discover that the vehicles always look like that because this construction business is rough on their equipment and the internal parts of the vehicles are very well maintained. You can’t let aesthetics alone sway your decision about a business.
You find out there’s a ton of employee drama.
If the business you’re considering requires employees then you’re likely going to encounter some sort of staffing issues (particularly when you first take over). If it seems like there’s an issue among the staff, ask the current owner why they haven’t dealt with it. Maybe what seems like drama is simply a culture that works as this staff has been working together successfully for a very long time. Maybe the employees who have issues with each other are able to keep it professional in front of customers and are really great at their jobs. In this case the issues don’t actually impact the business itself. Perhaps the current owner is a bit burned out and has become apathetic to employee issues that could be easily handled by you as a new owner laying some new ground rules.
You have to understand going in that a small businesses is going to be messy. Parts of it will likely be ugly. The mess and ugliness probably don’t tell you the full picture. Make sure you are delving a bit deeper to understand why things are the way they are – before deciding to walk away from what could be the perfect business for you.
Are you starting the search process for businesses and want to know what you should look for during site visits? Do you have questions about the kinds of small business issues that are relatively easy to fix as a new owner? Ask us! Leave any questions or comments and we would be happy to help.