When buying a business, there are some secrets that sellers and their advisors don’t tell you…. the profit is in the purchase, NOT the sale! Let me repeat that. The profit you make in business IS IN THE PURCHASE… In other words, it doesn’t matter how much you sell the business for, if you got a bargain you should still make money. Therefore, as a business buyer, my secret is to walk away from more deals than you investigate eg. look at 20, make an offer on 5 and negotiate with 2. Then, if financiers turn you down, it is time to look at the next.
In light of the @zoominbusiness buy, grow, value, sell principal, you should consider my 10 rules for buying a business:
- The business is in distress (survives despite itself, poorly performing, owner burnout)
- Has more cashflow vs. assets (must have a return on investment vs. paper or physical assets)
- Has low overheads (know the breakeven, fixed and variable costs)
- Requires minimal skills, low payroll & in demand product/service (high technical skills and payroll make it less economically viable)
- Poor sales & marketing (build the cashflow through implementing new marketing systems)
- Has a Driver on the team (employ the right person who is capable of running business without you)
- High Upside (opportunity for growth within the business)
- Great deal (set a firm purchase price and never pay more)
- Consider your circle of concern (Running a business is hard work that requires dedication, time and energy…the same stuff that sustains a good marriage)
- Assess yourself personally and financially (allow reality to overshadow the fantasy of being a business owner. If this opportunity does not pass your scrutiny test, let it go. There will always be others to consider.)
Finally, please remember to be patient when buying a business. I have found that the person who is the most flexible and cares least about “doing the deal”, usually wins. You also need to master communication as it is all about who says “no” first. I assure you that every extra dollar you pay when you buy the business, means another $10 or even $100 in cash flow you will have to generate and the profits are in the purchase!
Go for it.