There are many reasons people go into business for themselves including; to be able to do their own thing, no longer happy working for the ‘boss’, to make more of their own unique talents and of course money.
Before embarking on the process of buying a business, there are a number of important factors that you need consider.
- Am I ready to buy a business?
- What skills, talents and resources do I have?
- Do I have any idea how much time and work is involved in running my own business?
- Have I thought about how much money I’ll need?
- What return am I looking for on my investment?
1. Am I ready to buy a business
What brought you to the point of considering buying a business? Has it always been a dream you’ve harbored, something you’ve been working towards, or maybe circumstances beyond your control such as restructuring or redundancy have been the trigger. Whatever the reason and motivation, there are a number of important things to consider in more depth.
2. What skills, talents and resources do I have?
What is it exactly that you will be bringing to the table? Be specific, what’s your background, your past employment history? Have you been involved in a management role, how about finance, sales and marketing, manufacturing and production? In what position do you feel you excelled (or failed)? Do you thrive when working in a team or do you prefer to work independently? Be realistic and honest, you need to know what you can and can’t do. Highlight your strengths and weaknesses and then decide how you will develop those areas that are not currently a strong point.
3. Do I have any idea how much time and work is involved in running my own business?
Don’t think that because you’re the boss and it’s an established business you’ll be able to take it easy. Unless the business you buy is fully managed and you’re a silent partner, you’re going to have to play an active role. To start with you’ll need to learn about the business so that you understand it, then you’ll need to run the business to keep it going as it was previously. If you have further ambitions about growing the business beyond its’ current size you are going to have to put in more time and energy. How’s this all going to impact on your current lifestyle, on your family and on your leisure time?Be fully prepared for the realities of running a business on a day-to-day basis before you buy one. Try to spend time with someone who already owns a business to get some idea of the reality.
4. Have I thought about how much money I’ll need?
Ok, so you know the asking price of the business, that’s as good a place as anywhere to start. Now, how do you plan to finance this new acquisition? Do you have enough cash available to buy outright or are you going to need to arrange finance? Who will provide the money, is it a financial institution, a partner, a well-heeled relative? Are you considering mortgaging your home? How will you service the loan? How will you pay your own living expenses? What about the future? Can you access more funds if and when needed? Will you be able to build up a nest egg for the future?
5. What return am I looking for on my investment?
Is it realistic and achievable within the industry you have chosen? Maybe you are “buying a job” or maybe you have plans of becoming filthy rich. Does the business you are considering fulfill these ambitions or do you need to rethink your plans and find another business more suitable. Better to postpone at this stage and start the search again than to buy the wrong business.
A professional REINZ Accredited Business Broker can help you work through these issues and more.
They will be your best source for answering questions and resolving concerns. They’ll even address issues you hadn’t yet considered and in doing so will save you time and money.
Related: Why use a Business Broker
If you are serious about buying a business, help your Business Broker to help you. You’re about to embark on what is almost always a challenging yet highly rewarding experience, remember to have fun along the way.
Related: What does a Business Broker do?
February 24 2008 06:02 pm | The Professional Business Broker