Is Business ownership right for you?

Only you know the answer to that question.  Here are some things to consider.

First consider your personality and current lifestyle. Are you able to work 6 or 7 days a week for months on end? Could you deal with the stress that comes with the financial highs and lows that usually always accompany owning a business?  Are you honest enough about your capabilities to either work on areas of weakness, or will you seek help with those areas? Let’s consider this, say you’re a great salesperson but hate dealing with figures and can’t picture yourself closely monitoring daily operations, a dependable accountant could help you understand and evaluate the financial aspect and a trained employee pool can help ensure quality operations. Along with the personal evaluation, you will also need to assess your financial strength. You can’t assume you will instantly make money when you start your business—you probably won’t. In reality, you’ll probably lose money for at least six months, and possibly for several years. Remember that no one can guarantee you will be successful. The key to making money is creating value in your product or services. And creating value can take time. The money will come if your business idea is solid; you execute a viable business plan, and run a good business building valuable customer relations. If possible, it’s very beneficial to establish a means to ensure steady income while you get the business off the ground. This can help alleviate the financial stress that can come with starting a business and allow you to focus more on building a great business than on how you’re going to make the mortgage payment. Also talk with friends or family members who own businesses and learn from their experiences. Remember, do something you love. If you despise dealing with the public, retailing might not be the business for you!

Should you start up a business from scratch, or buy an existing one?

Most experts will suggest that you primarily consider buying an existing business. Some conditions in which it might make sense to start a new business are: you have significant and superior expertise in an area that would allow you to out-compete and gain market share from existing competitors; you have a unique idea that creates a new market.

Key Benefits of Buying an Existing Business

An existing business has eliminated a number of unknown variables for you:

1.                 You already know the number of customers/clients the business
has.

2.                 Operating systems are in place.

3.                 Experienced employees are in place.

4.                 The company already has a presence in the marketplace

5.                 A bank can make a more informed lending decision—possible
getting you better terms

6.                 You may be able to get the seller to finance some or most of the
purchase price

7.                 You have immediate cash flow—a known return on your
investment.

Other possible benefits:

1.  An existing owner who can train you.

2.                 Retaining existing customers or clients is cheaper than getting
new ones.

3.                 Employees may be energized by change and new opportunities.

4.                 No distraction from the myriad of start-up activities that have
nothing to with the ongoing process of building sales and
profits—setting up payroll, designing systems and processes, etc.

5.                 Established supplier relationships.

Some of the possible down-falls with buying an existing business:

• Your due diligence didn’t uncover all the problems.
• Older equipment.
• Loss of clients or customers loyal to the previous owner.
• Resistance to change by employees and customers.
• Operating systems may be outdated or inadequate because the previous owner didn’t “change with the times.”

One of the most important and delicate situations that you—and the seller—will handle is dealing with employees, particularly key employees. A buyer will typically not be allowed (and generally should not be allowed) to talk with key employees until a purchase contract and earnest money are in place. Handling conversations with employees poorly can cause serious harm to a business, including unplanned resignations, defection to competitors, loss of critical information, or just general unrest and negativity. Clearly, handling employee interviews—both before and after you take over, will be one of the most important things you do.

Even when buying an existing business, it is critical that you put together a plan for how you are going to achieve your objectives with the business. You should consider doing the following;

•          Put down on paper why you believe you will be successful with
the business.

•          Identify your sales and profitability goals for the business by
creating a pro forma financial plan with an income statement
including monthly projections for at least one year (monthly for
one year, quarterly for a second year, and an annual third year is
typical).

•          Objectively identify the investment required in facilities
upgrades, employees and marketing that will allow you to
achieve your goals.

•          Identify your customers as it relates to your marketing plan.

•          Do a comprehensive Cash Requirements analysis to ensure that
you are not undercapitalized.

•          After you get started in the business, keep yourself accountable
to your pro forma plan by aligning your monthly financial
statements in the same format and comparing your actual results
to the plan each and every month, and identify what changes
need to be made to stay on plan for both sales and profitability.

If you do your homework you will have significantly reduced risk when you purchase an existing business versus starting one from scratch. The due diligence phase is critical; be thorough, and objective and rely on your partners in the process like your CPA or attorney. Even if there are aspects of the business that need improvement, as long as you have properly identified them during due diligence and adjusted your offer and plans accordingly, you have a much lower probability of failure.

So search your soul, and then start your search for the business that will let you live your dreams of financial success and independence!