If you’ve got your mind set on owning your own business but you’re not too thrilled by the idea of setting one up from scratch, then perhaps you should consider buying an existing business.
Buyout entrepreneurs, as people who buy businesses are commonly called, find that big returns can come from the growth and revitalisation of existing businesses. Of course, it doesn’t happen overnight. A lot of hard work and planning goes into sustaining and improving the existing business before the new owner can reap rewards.
The advantages of buying an existing business
The main advantage you get from buying a business rather than creating a start-up venture is the reduction of risks involved. With a start-up, there’s a great deal of uncertainty, such as whether the business will break even in less than a year, whether it will be able to penetrate the market in the first place, whether competitors will “kill” you before you’ve even got a chance to find your balance.
When you purchase an existing business, you already know its reputation, its clientele, its strengths and weaknesses. You know what the cash flow is like, you know who the suppliers are, you know what kind of equipment is appropriate for the efficient running of the business.
Usually the infrastructure and management remains unchanged, so as to minimise disruption to operations – that’s another benefit too.
It takes time to find the right business
But don’t expect to be able to scan the newspapers and spot a potentially successful business for sale right away. It may take months, even a year to locate just the right business that matches your interests and industry experience.
When looking for a business to buy, don’t immediately write off those that aren’t making money. It may just be a matter of poor management. A wise entrepreneur will be able to scout out businesses that should be making a profit in no time, simply by implementing a better management process.
Some changes may be in order, such as upgrading the infrastructure or getting rid of weak links. A strong sales force and distribution system is vital to help your business achieve positive growth. The adoption of new technology can also help you increase efficiency and productivity while reducing costs.
As with any business, customers are the keys to success. It takes a substantial amount of time and effort to build up a good customer base, and if the business you’re eyeing already has this, then your job is made that much easier. But you have to ensure that the change in management does not result in customer migration.
A lot of small enterprises rely on customers that feel comfortable doing business with them. Drastic changes implemented may leave the customers feeling like they’ve lost a good friend and consequently taking their business elsewhere. Work on retaining these existing customers before focusing on finding new ones.
Of course, some businesses are just not worth buying. These include enterprises with little or no market potential, excessive competition or cost disadvantages. You’ll need to spend some time researching the backgrounds of these businesses before committing yourself.
Location, location, location
Location is another key consideration. I’m sure you’ve come across a particular site in your neighbourhood with an incredibly high turnover of businesses. You know, that one shop lot that somehow or other is always changing hands. Bad feng shui, some will say. Whatever the reason for the failures, you should avoid such a location.
When considering location, make sure it’s somewhere convenient both to you and your target customers. Also check the traffic in the area – good traffic flow can really help your business grow.