what should i know about buying a business Archives - Page 26 of 29

Published September 17, 2018

“I’ve always wanted to own my own restaurant”

We hear this one a lot. You might have a passion for great food, you might love the bar scene – but these loves from the patron perspective rarely translate to success on the business ownership side unless some basic requirements are met.

What are these requirements?

Experience

There are very few people who have little to no restaurant industry experience that have succeeded as the owners of a food service establishment. More often than not, the restaurant industry rookies that manage to buy a bar or restaurant drive it right into the ground in a shockingly short amount of time (we say “manage to buy” here because many property managers will refuse to issue a commercial lease to restaurant newbies).

The food service industry is rough. It requires an enormous commitment of time and energy. It requires the personality to wrangle a staff of typically young and inexperienced servers and bartenders while simultaneously ensuring no one is giving away your food and booze or taking money out of the till.

Sounds like fun, right? Not so much. If the restaurant industry is your passion, and you’ve spent a good deal of your working life learning the ropes as an employee or manager in this industry – then restaurant ownership will probably bring you success. If you don’t have the passion or experience, you should seriously, seriously consider something else.

Enough Capital

If you have $100,000 to invest in a restaurant, then you shouldn’t be looking at restaurants in the $100,000 price range. Why? Writing a check for the full amount of money that you have just to take ownership of a restaurant or bar means you are setting yourself up for an almost immediate failure. Working capital is essential in any industry, and the restaurant industry is no exception.

You will need money available for the litany of licensing requirements necessary for establishments that serve any form of alcohol. You need capital available to cover payroll for the first few weeks after you take over. You need the money to pay your vendors for the inventory you need to keep your patrons fed and happy. You need enough money to keep the doors open long enough to start turning a profit with you at the helm.

Consider the need for working capital when deciding what you can and can’t afford in the restaurant-for-sale market long before you start writing any checks.

Willingness To Work 24/7

If you are someone who is very involved in the lives of your children and need to be home every evening to help coach their soccer team, then buying a bar is probably not for you. The restaurant industry requires long, weird hours (think about when most restaurants and bars are open – like nights and weekends), so if the life you want to have outside of business ownership does not jive with these hours you might need to consider another industry.

It’s also not for you if you are the kind of person who likes to take a handful of long vacations every year. This industry deals with a lot of cash, and as such it is an industry where it is incredibly easy for employees to steal a little off the top. Successful restaurateurs are vigilant and omnipresent in their establishments to ward off these sticky finger issues.

If you have the drive to keep strange hours, the experience to get you through and enough capital to pay for the bar or restaurant you are interested in – then you have a great chance at success. If not, then there are plenty of other industries where you can meet your goals for business ownership without having to serve food or sling drinks. Talk to your business broker today about your goals and experience and they can help guide you to the right business.

Have you always dreamed of owning a restaurant, but don’t believe us when we say prior restaurant experience is a must? Have you had a disastrous restaurant or bar ownership experience that could help others that you’d like to share? Please feel free to leave comments or questions here and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Do You Really Want To Buy A Business? Prove It.

Published September 10, 2018

Why is everyone blowing me off?

If you’ve spent any time as a potential business buyer, you likely know what we’re talking about. No one will return your calls. Brokers seem apathetic at best. Sellers act like you are wasting their time. It’s like pulling teeth to get anyone to give you any information.

What gives?

It’s a numbers issue. The business-for-sale marketplace is full of buyers, but very few of them are serious. The stats show that a mere 10% of potential business buyers actually end up buying a business, so 9 times out of 10 a buyer really is wasting everyone’s time.

Ok, but I’m a serious buyer. How do I get everyone to take me seriously?

Be ready.

You need to be serious about buying a business before you start making phone calls. If you’re in the very preliminary stages – think several years before you plan on taking the entrepreneurial plunge, you need to make that clear when you talk to a broker. Explain that you are considering business ownership down the road, but would like their input on what types of businesses would fit your goals. If you are further along in the process and actually ready to buy – make that clear as well.

Know what you want.

You need to have clear goals for business ownership. What do you want out of owning a business? Do you want a more flexible schedule? Do you need more time with your kids? Are you looking to make as much money as possible and then sell the business in a few years? Your goals will guide what type of business is right for you, so you need to have those goals in place before you start asking for conference calls with sellers.

Be honest about your money.

Nothing is worse than getting close to a closing table, only to find out the buyer doesn’t have the money they said they did. You need to be 100% honest and upfront with your broker about the actual funds you actually have right now. You also need to listen to your broker when they tell you it’s a terrible idea to look at $100,000 businesses when you only have $100,000 to spend. You need to leave some working capital in your pocket so you don’t bankrupt your business immediately after buying it.

Make offers.

Once you know what you can afford and what your goals are, actively look for businesses. Once you’ve found one that fits – make an offer. The transaction process can’t begin until you do, and you can walk away from any business up until the moment the closing documents are signed – so making an offer doesn’t mean an absolute commitment to that particular business.

The message here is it can be tough to get the industry to take you seriously, and although it isn’t your fault that the numbers aren’t in your favor – there are things you can do to stand out from the crowd.

Have you always wanted to buy a business, but you aren’t sure where to start? Are you serious about buying but no one will give you the time of day? Please leave any questions or comments here, and we would be happy to help you on your journey to business ownership.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Buying A Business With A Partner? Why You Need A Break-Up Contract

Posted in Buyers Articles

Published September 6, 2018

Buying a business is a huge and sometimes overwhelming project, one that can oftentimes be better handled with a business partner to share the load. A good partnership means sharing the responsibilities, costs and schedule that buying and owning a business demands. Good business partners both bring their own unique and complementary skills to the table – allowing the partnership to help the business grow.

A good business partnership also has one all-important thing. A break-up contract.

What’s a break-up contract?

Similar in nature to a prenuptial agreement before a wedding, a “break-up” or partnership contract is an iron-clad and very detailed contract business partners sign that clearly states – in writing – the what and how if one of the partners decides to (or needs to) leave the business.

I’m buying a business with my best friend of 20 years, we don’t need a break-up contract.

Yes, you 100% do. Business partnerships fall apart every day, and sometimes it isn’t even because the relationship between the partners has soured. What if your best friend of 20 years gets divorced and his now ex-wife wants the business sold so she can have back the money they invested as a married couple when you first bought it? What if you have to leave to take care of a sick parent overseas and won’t be able to contribute to the business anymore? Having a predetermined plan in place makes the split easy at a time when life probably isn’t.

My business partner is going to think I don’t trust them if I ask to put together a contract like this.

First, if your business partner is making a judgement like this – they aren’t keeping their personal feelings out of what should be a purely business decision. Second, if you are worried that you might offend your partner – open the discussion by saying you both need to have a plan in place so the business can survive if something happens to one of you.

This seems like an unnecessary step.

Even if your business partnership ends amicably down the road, not having a contract in place can mean massive legal bills for both of you when it does happen. This is especially true if the split comes because of something like a divorce. You need to spend the small amount of effort and money now to protect both of you and the future of the business.

The message here is every business partnership will eventually end. That end can be a painful and expensive nightmare, or you can plan ahead and put together a business partnership contract that lays out what happens instead.

Are you thinking about buying a business with a partner, but hadn’t considered a “break-up” contract? Do you have questions about what a contract like this might look like? Please feel free to leave any comments or questions here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

How To Turn The Disadvantages Of A Startup Into Entrepreneurial Success

Published August 20, 2018

We all want to start the next Apple, right? Anyone with entrepreneurial dreams envisions the startup in the garage that grows to epic success – but where these daydreams fail is where they break with reality.

Startups are really, really tough. You are fighting against highly stacked odds, jumping into a market with an unproven concept that will take far more money to get to the black than you think. You won’t have a customer base, you will be starting from ground zero with an unproven marketing plan, you will have to vet and train a brand new staff and you will be doing all of this without any cash flow.

You can, however, approach business ownership in a slightly different way, while still meeting your goals for entrepreneurship. How? Buy an existing business.

Why? Existing businesses can take some of the disadvantages of a startup off the table. Here’s how:

Existing businesses come with a customer base.

When you buy a functioning business you get the clientele as well. Contracts with customers, the regulars at the bar – they typically come with the deal. The best way to keep those customers is to avoid making any changes until you understand why those customers are there. Rate hikes on contracts and getting rid of karaoke night might seem like good ideas on paper – but they will push out the all-important customer base you inherited.

Existing businesses typically come with a marketing plan and name recognition.

One of the major challenges of starting a new business is getting the word out about who you are and what you do. An already existing business has jumped that hurdle – your job now is to push for more growth by constantly developing and improving your marketing plan.

Existing businesses have a staff in place.

A brand new business can be extraordinarily tough because there isn’t a veteran staff to show everyone the ropes. With an existing business a fully-trained staff is already in place. A caveat here – just like the advice for your customer base, major staffing changes right out of the gate will likely hurt more than they help. Take some time to understand what everyone does and how their presence helps the business before cleaning house.

Existing businesses have cash flow.

It can take months before a startup gets to a point where the cash flow is enough to cover expenses. An existing business exists because this need for cash flow has already been met. Be careful, however, not to overextend your expenses with too many changes or improvements before you fully understand where that cash flow is coming from.

The message here is while your garage-business daydream might be fun, an existing business can get you there without having to contend with the pitfalls of startup-hood.

Have you always wanted to own your own business but didn’t know you could buy one? Do you have questions about the differences in risk between startups and existing businesses? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Buying Or Selling A Business? The Right Help Makes All The Difference

Posted in Business Broker Why & How, Buyers Articles, Sellers Articles

Published August 13, 2018

Looking for a business to buy or thinking about selling the business you currently own? Either side of a business transaction is a tough and complicated road – and definitely one you shouldn’t travel alone.

So, who can help me with business transactions? Business brokers can.

A business broker is a professional who helps people buy and sell businesses. They are well versed in the transaction process, and know all of the potential pitfalls so you can avoid them.

Few people outside of the business transaction world truly understand what business brokers are and what they do – so here are the answers to some common questions about our industry:

What do business brokers do?

If you are a buyer a broker can help you search for businesses to buy, help you narrow down your choices, help you put together an offer, help you negotiate a purchase contract, help you with any necessary licensing and permitting and help you work with the seller as they show you the ropes.

If you are a seller a broker can help you prepare your business for sale, help you come up with an appropriate listing price, confidentially market your business, vet potential buyers and get non-disclosure agreements signed, show your business to potential buyers, help with negotiating a purchase contract, help you with the closing process and help you find your next business venture after you sell.

How are business brokers licensed?

Business brokers are typically licensed by their state’s real estate division, but what they do isn’t real estate. To put it simply state licensing divisions can’t possibly have a separate license for every applicable industry, so in some cases a profession is lumped in with an industry that is similar. That is the case with business brokers. They typically hold a real estate license or a real estate broker’s license.

Who is, and isn’t, a business broker?

The buying a selling of businesses and the buying and selling of property or homes are two completely different animals. Property and homes are sold by broadcasting the availability of the property/home to everyone, everywhere. Businesses, on the other hand, need to be sold confidentially – so the approach is completely different. Listings for businesses are extremely vague, and only after the signing of non-disclosure agreements will the name and location of a business for sale be divulged. It is this vastly different approach of sales techniques that makes it critical for business buyers and sellers to work with experienced and qualified business brokers and not real estate agents trying their hand at selling businesses.

Many professionals outside of the business transaction industry make ill-fated attempts to dabble in the buying and selling of businesses on the side. While unqualified real estate agents are the typical offenders – we’ve seen dentists, lawyers, accountants and the like they their hand and fail. The business transaction process is complicated, and to be successful you need to know what you are doing. Part-time business brokers aren’t business brokers, so avoid them. If your good friend or brother-in-law is a real estate agent who thinks they can successfully help you buy or sell a business, they can – by referring you to the appropriate professional. All your real estate agent needs to do is refer you to a qualified business broker, and when your transaction closes your real estate agent gets a referral fee for doing nothing more than making a phone call – and you get the right help.

Who does a business broker represent?

While your business broker is your advocate during the transaction process, they don’t technically represent one side or the other. They are transaction brokers, and therefore represent the transaction itself. For this reason it is possible in many states for a business broker to work for both the buyer and seller’s side.

How does a business broker get paid?

Business brokers make their money by earning a commission when a transaction closes, paid for by the seller’s proceeds of a sale. This is why buyers who spend years searching for businesses without ever taking any serious steps toward buying one (like making an offer) might have trouble getting an experienced broker’s attention. Serious buyers and serious sellers are easily distinguished from those who are just kicking tires.

How can I find a good business broker?

Finding a good broker can be a bit of a challenge, but there are some obvious signs that can distinguish the good from the bad. Great brokers get the vast majority of their business from referrals – from past buyers and sellers who were impressed with their work, from colleagues in other industries who’ve referred friends and family to great success – so ask a potential broker how much of their business comes from this good-review-based source. Good brokers also respond to calls and emails in a realistically timely fashion, have lots of connections within the industry and have some practical experience under their belt.

The message here is the road to buying or selling a business is best traveled with the right help – so finding an experienced and qualified business broker should be your first step!

Are you thinking about buying or selling a business and want to know more about what business brokers do? Do you have more questions about the transaction process? Ask us! Feel free to leave comments or questions and we would be happy to help!

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Great Questions: What Business Buyers Should Be Asking

Published August 6, 2018

If you are beginning the process of buying a business, then conversations with business sellers will definitely be in your future.

You can find lists of questions to ask in many places, and although these traditional questions like “how much is the lease?” or “why are you selling?” are very important, there are some less-traditional questions that can be equally important to ask.

Why ask questions of the seller at all? Couldn’t they just be telling me what I want to hear? Isn’t it a better idea to let the numbers speak for themselves?

Yes and no. The hard facts, like the numbers in the books, like the contracts and client agreements – these can tell you much of what you need to know about a business and can bring forth facts that will be instrumental in your decision to buy or not to buy.

Buyers who don’t ask questions of sellers, however, are missing out on very important information. The person who is selling has lived and breathed this business for some time, and their experience, the reasons they’ve made the decisions they’ve made – this information can speak volumes to a buyer.

Why? It gives you a unique behind-the-scenes perspective you can’t see in black-and-white numbers on paper.

What kinds of non-traditional questions should you ask? Here’s three:

What parts of the business keep you up at night?

This one is important because the answer gives two very important insights. One, it shows any problems that might not be readily apparent in the books and two, it will give a buyer a chance to see what might need to be addressed early on in their ownership.

If you could start over from scratch, what would you do differently?

This question also gives two insights. First, like the previous question this one will highlight any issues with the business. The seller will probably express that they would make changes to avoid the problems they currently face. Second, it will give a buyer fantastic advice as to the changes they could make right out of the gate to help the business grow in the future.

What are you going to do if the business doesn’t sell?

If a seller answers “close the doors and walk away”, then a buyer needs to take a closer look at why the current owners would be willing to give the business up. Is it because of a personal issue that they must attend to like moving to another state to care for family? Is it because of a health issue that would preclude the seller from performing their daily duties? Is it because the business is teetering on bankruptcy?

On the other hand, a more positive answer to the “what if it doesn’t sell?” question like “keep the business running and growing until I find the right buyer” says a lot about the health of the business and the current owner’s faith in the future of the business.

Asking these non-traditional questions and even coming up with a few of your own will be very helpful in determining whether or not a business you are considering is right for you.They also make it possible to see past the black and white numbers to see what life has been like for the seller (and what life will be like for you should you buy). Ask great questions and you will have a far better chance of finding the right business for you!

Have you started looking at businesses and have more questions about the kinds of things you should ask? Do you need help figuring out what questions to ask for a particular business? Ask us! Please feel free to leave comments or questions here and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Weighing Advice: How Business Buyers Should Deal With “Help”

Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles

Published July 23, 2018

Everyone is an expert, right?

We all have that person in our life who talks confidently about every subject while knowing little to nothing about the things they speak of. They string together urban legend, conjecture and memes from the internet into what sounds like a coherent piece of genuine information when, in fact, it is nothing of the sort.

If you are thinking about buying a business and you’ve told the people in your life about this new pursuit, then these fact-free advice givers will come out of the woodwork. Everyone, at one time or another has considered what life would be like as a business owner – and as such almost everyone feels qualified to offer their entrepreneurial advice. You will get unsolicited advice from seemingly everyone: your brother-in-law, the mailman, your dentist, your neighbors. While everyone’s intentions are good – to help you – the information you are given should be taken cautiously. Even the opinions of those you trust, like a very close friend, should be taken within the context of whether or not they actually know anything about buying or running a business.

Take, for example, the rent payments on a waterfront restaurant. If you are considering buying a large waterfront restaurant, especially one in a desirable location, then you should expect the rent to be high. That high rent, however, when compared to comparable businesses in the same area will probably be right in line with what you should expect to pay. Also, a desirable location means more customers in the door – meaning you will be perfectly capable of paying that high rent so long as you don’t run the business into the ground.

What unfortunately happens to many new buyers is they mention this high rent rate to someone who knows little to nothing about either the restaurant industry or the area in question and they balk at the number, exclaiming “That’s ridiculous!!! Don’t buy that business!” when the opposite is true. It’s a great business and falls right in line with both the buyer’s budget and their goals for business ownership.

There are many, many examples of instances where bad advice has driven a buyer from a perfectly good business – particularly when discussing matters of price. We’re not telling you that you shouldn’t listen to the opinions of those you trust, we’re just saying that you should consider their expertise in the matter before you take their advice as doctrine.

Who should you listen to? Your business broker is a good source of information because they eat, sleep and breathe business transactions and a good broker will know their local industry inside and out. Your business broker is also a reliable source of information because it is in their best interest if you succeed in your new business. You may refer them the business owners or business buyers you meet if you are happy in your business decision, and when the time comes to sell they hope you will use them again. A great business broker gets a great deal if their business from referrals and repeat clients.

You should also listen to the advice of your business transaction attorney and your business transaction CPA (if you end up using one) as they too know the industry well.

Notice we said “business transaction” attorney and CPA, not any attorney or CPA. Your friend who practices labor law and your uncle who does accounting for a rental car company aren’t going to be able to give you good advice about buying a restaurant because that’s not what they do. It would be similar to asking your car mechanic his advice about whether or not you should undergo back surgery – it’s not his area of expertise.

The most important person you should listen to? Your own common sense. Take the information you gather from all of your sources, weigh the validity of their opinions based on their real expertise in the matter – and then decide for yourself. You are the one buying the business, not the peanut gallery, so if the decision makes sense to you then that’s all that really counts.

Are you looking at businesses to buy and getting all kinds of advice at the same time? Do you have questions about some of the advice you’ve already been given? Please feel free to leave your questions and comments here, and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Buying Or Selling A Business? Don’t Underestimate Training

Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles, Sellers Articles

Published July 2, 2018

Have you thought about what happens after the keys change hands and the buyer and seller walk away from the closing table?

The transaction process isn’t over yet – now the training period begins.

When a business is sold, part of the purchase contract will typically cover a training period of some sort where the seller will stay on with the business until the buyer can be sufficiently trained to take over the helm. This is an all-to-important part of the business transaction process, so it is in everyone’s best interest to keep the training period productive and amicable.

The best way to start the training period off right is to keep the negotiations during the sale process as friendly as possible. Both parties can do this by always using the business brokers involved as intermediaries. It might seem inefficient to always send questions or comments through a third party, but what starts as an innocent phone call to the other side can quickly devolve into a deal-killing fight. Keeping things friendly for the time period before your are stuck working together will make the start of training much easier.

If you are the buyer in the situation, it may be tempting to walk in on day one and completely change everything to your liking. This is a huge mistake for two reasons.

One, you shouldn’t make any changes to a functioning and profitable business until you know everything there is to know about the business. Then, and only then, will you know what parts of the business are making it profitable and successful and what aspects can be changed without causing any unforeseen damage down the line.

The second reason your should hold off on any changes is for the seller’s sake. The seller has a wealth of practical knowledge about the business you just bought, and it is absolutely in your best interest to get absolutely all of that knowledge before the training period is over. By coming in and changing everything, you are essentially telling the seller you don’t think anything they’ve done is worth learning about – a move so insulting that you will probably have an incredibly hard time getting any of that precious practical knowledge. Try to remember that this business was a huge part of the seller’s life, so treat them with a bit of compassion and wait until they are officially gone before you implement any big changes.

If you are the seller in the transaction, the training period can be difficult for a number of reasons. First, once you’ve left the closing table and the keys have changed hands, it can be very tempting to mentally check-out. This is a very bad idea, especially if your deal has seller financing involved (which many deals do). If you check-out and can’t properly train the new owner, the their chances of success (and you seeing the rest of your money) are probably not very good.

Another training pitfall for sellers is getting offended when the new owner wants to make changes. It can be extremely difficult to keep your emotions in check, but you must remember that this business no longer belongs to you, so the new owner can do what they please. Do your best to complete the training period amicably so that your business can carry on successfully without you.

Whether you are the buyer or the seller, it is critically important for the survival of the business in the long term that the training period happens – so do your best to work together.

Have you bought a business and the training period wasn’t what it needed to be for you to successfully take over? Are you selling your business and you have questions about what the typical training period will be like? Please feel free to share your experiences or leave us questions here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

The End Of 2017 And 2018 Ahead – BizBuySell’s 4th Quarter 2017 Insight Report

Posted in Buyers Articles, Sellers Articles

Published May 14, 2018

BizBuySell’s 4th Quarter 2017 Insight Report shows record highs in the business marketplace, with small business transactions up 27% over the previously record-breaking 2016 numbers. The market has been steadily growing since the recovery for small businesses began in 2013, but 2017 marks a large jump in the number of businesses changing hands.

Why the big jump?

To put it simply, money. Small business revenues are up in most industries, with the economy at large continuing to grow. More businesses are coming on the market, with baby boomer owners choosing to retire and cash out of their businesses while the selling is good. More buyers are also taking the plunge into entrepreneurship with lending options that dried up in the wake of the 2008 recession slowly coming back to life. Added together, today’s market is a boon for business sellers, with many businesses selling for more than they would have two or three years ago – a whopping 14% more.

It’s also a good time for business buyers. They might be paying a premium for businesses, but the businesses they are getting are typically in very good financial shape. The same could not be said post-2008 as the glut of faltering businesses on the market meant you could get a good deal – but you had your work cut out for you.

Will the good times continue?

In the short term, probably. The last quarter of 2017 showed continued growth, with 23% more closed transactions and a 12% increase in median sales price over the same quarter of 2016. Levels that strong will likely continue well into 2018, but those who survived the meltdown of 2008 are beginning to fear another bubble.

The smart move?

If you own a business and were planning on selling in the foreseeable future, now is the time. The market may continue to climb or we may be quickly approaching the peak. There are buyers with money and your business is in the black, so the safest bet is to sell while the selling is good. This is also true if you were considering selling so you could buy a different business. The businesses on the market today are healthy, so a serial entrepreneur would be smart to take the large profit from a sale today and invest in a new opportunity now. The same is true for first time buyers – businesses are healthy and are a great buy.

Want to know what the market looks like for your industry in particular? Do you have questions about when you should sell? Are you thinking about buying a business and want to know what’s currently available? Contact us today.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Finding The Right Business: 4 Questions To Ask

Published April 9, 2018

When you decide that the next step in your career is to buy a business and try your hand at entrepreneurship, there will be many decisions ahead of you. Possibly the most important decision will be what business would be right for you.

Yes, we know. Everyone who’s ever dreamed of owning their own business has a dream business in mind – but focusing on that business alone, without some careful thought, can lead to disaster down the road.

Why? Dreaming about owning a business and actually owning that business are two completely different animals.

Long before you look at listings, you need to ask yourself the following four questions so you can focus your energy on the right business – not a dream business.

1. What would you love to do?

Business ownership is a life-encompassing affair. You are going to work long hours, probably take less vacations and you will be on-call 24/7. The only way to mentally survive such a grueling schedule is to have a real passion for what you do. It has to get you out of bed every morning and push you through late nights. This is where the dream-business can be of some use. Why is it your dream business? If you’ve always dreamed of owning a cafe, but in those daydreams you aren’t making coffee – you’re sitting at a table going over numbers, this can tell you volumes about what kind of business you would actually enjoy (hint, it’s not a cafe).

2. What have you done before?

The learning curve of business ownership is a steep one, mostly because any mistakes can cause a severe change in your bottom line. Many budding entrepreneurs make the mistake of buying a business they know almost nothing about – and are then stuck both learning a brand new industry and learning how to be a business owner at the same time. You need to stick to your knowledge base and the skill set you already have if you want to be successful. Hate what you’ve done for work in the past? If escaping your current industry is the reason you are considering business ownership, then think more broadly about what your skill set includes. If you’ve spent the last decade working as a mechanic for an auto dealership, but you have a gaggle of old cars at home that you love to restore in your spare time – then perhaps an auto restoration business and not a standard garage would be for you.

3. How much money do you have?

Business prices can fall anywhere on the map, but there are some industries and some business sizes that will be off your list for financial reasons right out of the gate. You need to get your capital in line before you start seriously looking at businesses because the amount of money you have to spend will determine what you even get to look at. You also need to be honest with yourself at this stage and realize that a traditional loan is probably not going to happen, and even if seller financing is a possibility you will have to bring a substantial down payment to the table to get a deal done.

4. What would your local market support?

Although an extreme example, you wouldn’t start a water skiing business a hundred miles from the nearest body of water – but you get the idea. Some local markets just won’t support some types of businesses. You need to look at the local business market and do a bit of research on the industry you are considering. Is the industry growing? Have a large number of businesses in that industry gone out of business recently, or are they thriving? If your plan is to buy a business and change it to a different market, is that market already saturated or is there room to grow? Say your plan is to buy any small restaurant and convert it into a homemade donut place, but the town you are considering has ten Dunkin Donuts and five Krispy Kremes. Probably not the best market.

When you’ve asked yourself these questions and have a fair grasp on the answers, your next step would be to have a conversation about the right business for you with an experienced business broker. A good broker has been down this road many times, and can give you great advice on what the local market will support and ideas of businesses that would fit your skills and goals that you may not have considered. They can then show you the businesses currently for sale that would meet your criteria and you can find the business that is right for you.

Are you thinking about buying a business, but after reading this think that your “dream” business may not be right for you? Do you have questions about what industries your current skill set would apply to? Ask us! Feel free to leave us a comment or question here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907