In my seminars, I have been talking about the various options to people that want to own their own business.
A. Start a business from scratch and build it slowly while maintaining your existing job.
Doing this allows you to learn all about the industry you are going into. There will be few surprises by the time the business hits its break-even point. Look at all the people that go on TV shows to raise capital for their expanding business. They have a solid direction, and will succeed if they have good business basics.
B. Buy an existing business that claims it is making a profit level that you can support your family and your life planning.
If you have millions to invest, by looking at 100-200 businesses you will find what you want. If you do not have millions, you need to find an affordable business that claims it is making $100,000 to $500,000. When looking for this kind of business, I hear buyers tell me they want a business where the seller is getting out because he wants to retire. You might assume that the business is doing fine. Be aware that the seller knows a change is needed in his life, it might be because he cannot compete any more. We will come back to this group of businesses shortly.
C. This is what I have been recommending to you if you are frustrated buyer.
I suggest that you buy an operating business that is doing poorly but is not ready to close its doors. The seller is clearly telling you that the business is only making him wages. Businesses in this condition should sell for the value of the equipment or maybe one year’s earnings. Why so low? Because you are buying a job and not a profit making business. Then you take the $300,000 you saved by not buying one of those higher profit businesses, and pour the money into marketing, you will in fact build the business into a higher profit business.
Since you did not spend all your money on the business purchase you can get educated by hiring smart people and experiment on marketing ideas.
There are all these IT kids and Computer Science kids that can do wonders for antiquated businesses. You also can afford to invest in new state of the art computerized equipment that will save you big money on labor costs. With newer, more efficient equipment you will be able to compete in the market place for jobs and new client orders. If you watch the business success stories on TV, you will see how Marcus turns companies around by automation and building proper websites. He also handles mismanagement issues, which you might not have because you are replacing the old management that has been mismanaging.
This is what I consider fun.
I have bought a few businesses in trouble and also started some from scratch, when I observed small areas that had been ignored. Since I am older, I would only build a business for myself if my kids wanted it for their future. Otherwise I am happy to help my friends and clients make money, and give me a game to play.
I would now like to go back and discuss the businesses that are on the market that claim they are making very nice profits.
All day long I review these business that my clients are very interested to buy. What I find is that the presented profit number for the past, may not be secure for the future.
Even in such low-tech businesses as smog shops and tire shops there are things happening in the future that the seller knows about that you may not be aware of.
What is becoming more and more clear to me is that these businesses, even though they are making a few hundred thousand dollars profit can and need to be overhauled using new computer technology and marketing. If they are not overhauled, the income stream will become at risk. You cannot be comfortable, in buying a business and just working it. There are kids working in their garages trying to figure out how to have you for their lunch. (As one very successful venture capitalists loves to say.)
I suggest you spend a few hours with me at one of my seminars or in a private session and let’s look at your options for going forward.