This article was written by Richard Eggleton, SCORE Orange County Management Counselor
As SCORE counselors a large number of our clients have contacted us to help them start a business and a very small percentage that want to buy a business. Since the SBA reports that over 75% of small business start-ups fail taking the time to look into buying an existing business may be a much better alternative.
There are many advantages to buying an existing business including but not limited to immediate cash flow, existing customers, staff in place and trained, business relationships with vendors in place, training buy the owner, opportunity to grow the business and relatively easy financing is available. It takes time and money and effort to put all the elements of a business together and the outcome is unpredictable. It maybe more cost effective to buy and existing business than start your own.
What stops people from exploring buying a business can either come from the prospective entrepreneur’s passion about their business concept. It is this passion combined with a lack of knowledge and a plan that calls for too little capital that causes many business failures.
The other major obstacle stopping people from buying a business is they don’t know where to start. Often the prospective buyer looks on the internet, finds a business listed for sale, and contacts the broker who has the listing and is either ignored or put through a process by that broker that just doesn’t seem, look or feel right. How to effectively and efficiently deal with business brokers is a topic for another article, consultation, or workshop.
Most people who look for a business on line either can’t find anything that they like because there is nothing that appeals to their own concept of the business that is right for them. Unfortunately the buyer may be too focused on what the business is rather than what the business can do for them now and in the future. Owning a business is all about the future in your dreams. What is your dream?
One place to start is to identify the characteristics of your ideal business in general terms. Yes, everyone wants a good business but what does that mean? There are some basic elements everyone should start with:
- Stable industry not a fad
- Room for growth in the industry
- Documented operating procedures
- Available in the geography you want
- Affordable for you
- Makes as much money as you need or want
- Optimizes your skills, talents, and abilities in its operation
Of course there are many other considerations that comprise your personal requirements like days and hours of operation, employees and customers you feel comfortable with and far too many others to list.
Should you consider buying a business? Probably. Check for upcoming SCORE workshops on this topic.
