Business Buyer Mistakes: Are the “Top 10” Businesses to Buy Really Tops?

Recently, I was sent a report of, “Which Business Types Were The Top Sellers,” based on the information provided by one of the top business-for-sale web sites, in the world.

Business Buyer Top Ten Mistakes?

Convenience stores were at the top of the list, followed by restaurants, e-commerce businesses, bars and automotive businesses. The next five positions were all retail food store types, of various kinds. Non-food retail stores were not one of the top 10 items. I found this report amazing.

After doing due diligence on thousands of businesses, I have come to the opinion that the highest risk businesses today are fast food, sit-down restaurants and all varieties of retail food store fronts. Automotive businesses and gas stations aren’t far behind. They are less risky but still not a safe bet.

My working opinion after years of due diligence for business owners is that the single business in the top ten that is lower risk is an e-commerce business.

Convenience stores (known as “c-stores”) tied into gas stations have a definite advantage over other kinds of convenience stores. They have a captive audience, so to speak, since customers often have to go into the store to buy gas.

Advertise and Promote

Success in owning a retail storefront depends totally on how much demand you can create for your product. Small retail businesses simply cannot afford the money needed to create that demand. Demand is created through face to face sales, promotion and advertising. A retail business that does not spend a large budget on promotion cannot survive today, no matter how cute the product. People still buy emotionally, but they really have to justify the emotional purchase by believing they got the discount of the century. The purchasing of clothing has been reduced substantially, because teenagers – who buy the most clothing – do not have jobs or spending money to the same degree as before.

Automovie Mechanics

Automotive mechanics and other automotive repair businesses are down 30% in volume from 2008. The primary reason for this is that more people are buying their parts at one of the auto parts houses and installing the parts themselves. A well know oil changing shop was previously a top moneymaker but now they are just another oil change pit stop. Unknown independent auto parts stores stopped making a profit years ago. Auto body shops who don’t have insurance contracts continue to have a very rough time of it. Those auto body shops that have insurance contracts are still doing business and making a profit, but even those are down 20% in volume.

Insurance Companies

Insurance companies’ negotiated rates with body shops are squeezing all body shops. To make matters worse, consumers are more often pocketing their insurance payoffs without doing the body repairs. The good news for body shop owners is that they still can make close to $100,000 per year if they trim their staffs appropriately and the rent is low.

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Image credit: bluebay2014  iStock
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