Whether you are plunging into the entrepreneurial waters for the first time or you are a seasoned business owner looking for a new venture, choosing the right type business to buy requires quite a bit of due diligence and soul searching.
With so many options available, how do you choose a business that’s right for you? Let’s take a look at critical factors you will need to consider before making this decision.
Your Expertise
No matter how good a business appears on the surface, it’s may not be the right fit if it’s too far outside your realm of expertise. Consider what skills this business requires. Are you familiar with the industry? Does your previous experience and skill set translate to this new endeavor? If your gut check says no, you may need to consider other options.
Passion Counts
A new business can require a lot of TLC from its owner. You’re going to invest not just your money into this endeavor, but also your energy and time. Make sure you will enjoy the activities you will be performing. Ask yourself:
- Does the nature of the work appeal to you?
- Will you be spending your time in an office, in a store, or on the road?
- Will your role be as an overseer, a salesperson, or a technician?
- How much will you be working in the business as opposed to on the business?
One of the key ingredients for growth and profitability is passion. If you are enthusiastic about the nature of the work you will be performing, then you are more likely to be successful.
Make Sure the Business is Viable
Before you purchase a business, spend time doing some market research. Find answers to the following questions:
- Is this business meeting the needs of a specific audience?
- Are there customers who are willing to spend money to buy what you’re going to be selling?
- Are there enough of them to support a profitable business?
- What does the competitive landscape look like in the area you’ll be setting-up shop?
- What is the current status of the industry you’re pursing?
- As a whole, is the industry on an upswing or has it peaked, and interest is now ebbing?
- Is the space overcrowded with other businesses just like the one you’re considering?
Reviewing the financial records of the previous owner will tell a lot about their profitability, but past performance does not necessarily translate to future success.
Understand the Total Investment
Whether you’re buying an existing business or launching one from the ground-up, it’s important to understand the full depth and breadth of the commitment you’re about to make. What does the sale price include? What other elements will you need to invest in? Be clear on the capital purchases you’ll need to make, real estate you’ll need to secure, and other expenses that may not be included in the purchase price. Don’t leap until you’re comfortable with the complete financial commitment for this business.
Franchises
Ultimately, your business reputation depends on customer satisfaction. Building a business with a mission that is centered on a customer-first philosophy will set the tone for a positive experience. It’s important that you set this tone from the top of the organization. When your employees see you living this philosophy, then they are more likely to follow suit.
Get the Complete Picture
For some, a franchise may be a good entry point to small business ownership. Good franchisors offer a solid framework from which you can grow your own business. From best practices to established brand recognition, buying a franchise becomes a collaborative effort that equips you for success.
On the other hand, franchises come with a readymade menu of items or services you can sell, brand marketing you must adhere to, and a host of other pre-set parameters. If you’re looking for more freedom in defining your own business, this may not be the right route for you. Take a good hard look at what the franchisor requires and make sure the program they’re offering meshes well with your overall objectives.
And when you have chosen the business that’s right for you, the next step is to partner with an experienced firm to help with determining the company’s value and profit potential. That’s where we can help! Our team of business consultants, financial experts, and analysts can help ensure you are heading in the right direction.