August focus: Domestic Cleaning Service

To Buy or not to Buy, that is the Question

You may have been asking yourself whether it is best to establish your own business or to purchase one from someone else, be that either a franchise or an independently operated business that is already established. I will write here about what I feel are the pros and cons for both ways of going into business for yourself, and then it will be up to you as to what you decide to do. This article is dedicated to teaching you how to do it yourself.

Purchasing a business is often a costly exercise and has no guarantee of being successful. What makes a business a success is often the person running it, the systems they have in place and the people that are providing the service. If you are investigating purchasing a business where the owner is more or less the only person involved in the business, then you will need to take into account the fact that it is their own unique personality and style that makes their business successful. You would then have to consider whether you have a similar personality and style and if yours could slot into the same position that the current owner is taking. If you don’t have a similar personality and style you may find that after purchasing your new business the amount of money being made by the business quickly decreases. This is due to the fact that your personality doesn’t mix the same way that theirs did, and your clients or customers prefer the previous owners’ style, therefore they no longer desire to do business with you. This can be devastating to any new business owner who has dreams of doing well. When this happens the new owner is inclined to think that they have been sold a ‘dud’, but the truth is that they simply aren’t able to provide the same unique service as the previous owner. It was their unique blend of traits that allowed their business to be a success, and if the new owner doesn’t have that same blend and use it in the same way, they are definitely not going to get the same results. This could happen to you, so be aware of this when investigating buying a business.

Next, if you think that you can borrow money to buy a business you will need to think again. Banks know the statistics on business survival and will not lend money to people going into business for the first time. It doesn’t matter how well the business is doing, banks will simply not risk lending their money out to people who want to buy a business. The business is not a tangible asset like property is, and it is difficult for them to take it away from you to retrieve their money if you don’t repay your loan. Well, they could, but that would mean hiring someone to run it for them and that would be too much hassle as far as they are concerned. The only way they will lend money to buy a business is if the loan is secured against your property – and I wouldn’t like to risk losing my home just to buy a business that isn’t guaranteed to survive.

Often too, the price being asked for a business is way over-rated in my opinion. Yes, businesses are priced according to a formula, and that formula is often one year’s net takings, but considering that it would only take about eighteen months to grow into a business if you were to build it yourself why would you risk spending the money? It is the fear factor that sets the price of a business – your fear that you can’t do it yourself. Well, after reading this month’s articles you won’t feel that fear and will have no need to spend the money.

You should also watch out for hard-sell sales techniques used by business brokers. They make their money from being the gofer between the seller and the buyer, and they don’t really look after the interests of either party in my opinion. I have been on both ends of the experience and have never had truly honest, interested, supportive service in any of the three encounters that I can speak personally about. When you are a purchaser you should never show any sign that you are interested in a business. Once you show signs of interest you can be hooked into the deal before you know it and end up spending money that you didn’t need to because of your excitement and enthusiasm.

It has been my experience that brokers have no scruples – they need to make the sale in order to put food on the table and a roof over the heads of their family members. They work neither in the interest of the seller nor the buyer – they work only for themselves. It does not matter to them whether you are suited to the business. It does not matter to them whether you are capable enough to handle it. All that matters to them is whether you can come up with the money to buy the business, from which they receive a commission for the sale.

This can only work in your favour if you are the person selling the business, so I would only use the services of a broker in order to sell a business. Then I would recommend selling it well before you were too desperate, so that nobody could manipulate you into selling for less than what you want. Remember, in this case the broker works for you, not the purchaser. If they can’t get the price you want tell them you’ll find another broker who can.

You can read in the next article: Getting Started: Building with a View to Selling