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Mixed Voices business column
Seek help when shopping for a business
By: Joe Warner, Guest Columnist
Have you ever wanted to kiss your job goodbye and be your own boss? You are not alone. Surveys show 50 to 75 percent of all Americans want to own their own business. With all the lay-offs these days, many people consider owning their own business new job security. Nearly one-third of all laid-off employees will take some type of action toward buying a business but only about 3 percent will succeed. What separates the dreamers from the doers?
Information is the key. There are two pathways to business ownership – you can start a business or you can buy an existing one. Either choice comes down to one question: What are your chances of success? Starting a new business represents an enormous risk and you have to ask yourself if you are willing to assume such a gamble, especially if you have a family to support. The advantage to buying an existing business is that is has weathered that start-up phase, has a degree of stability, an employee and customer base, and, as a result, immediate cash flow. That means it can pay you a salary and pay off the debt incurred to buy it, assuming you buy it right.
Unfortunately, buying a business is a process that most people are not familiar with; it is unlike any other sales situation. Nearly all successful businesses are sold in an atmosphere of absolute secrecy. Why? The owner does not want anyone to know that their business is for sale. They do not want their competitors gleefully wooing their best employees and customers alike. In fact, 80 percent of business owners who may be nearing retirement do not engage a broker to help them sell their business for fear their plans will become public. Even when contemplating selling, they put off any action that could be detectable. What does this mean for the buyer?
Remember the law of supply and demand. For successful businesses, it is now and always has been a “seller’s market.” In fact, so few good businesses are available through brokers that when they do appear, buyers bid against each other to snatch them up.
Inexperienced buyers often use up their nest egg for living expenses while looking and miss out on the few “good ones” by not acting immediately. They look from broker to broker, but never see the quantity of deals they need and want – much less the quality. Finally, in frustration, they either settle for a business that doesn’t fit, or give up and take a job that also doesn’t fit.
So how do you get into the 3 percent group? A smart buyer can outsource this complicated search process to an experienced professional who will find the other 80 percent of business owners. Once a good opportunity is found, they can rely on the broker’s expertise and knowledge to help them make an informed decision. But beware. Unlike the “what’ve you got?” approach, results of a retained search may overwhelm the buyer with options. Results are astounding in comparison.
Recessionary times mean more buyers, more demand for the same supply Yes, financing is harder to get, but rates are lower so cash flow can more easily pay debt service on a better business than ever. And if the business – and your plan – is strong, you can survive the recession and enjoy a strong business for years to come.
Joe Warner is a certified business intermediary with Sunbelt Business Advisors in Overland Park.
To submit a business column, e-mail Chris Rodgers at crodgers@sunpublications.com.
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Information is the key. There are two pathways to business ownership – you can start a business or you can buy an existing one. Either choice comes down to one question: What are your chances of success? Starting a new business represents an enormous risk and you have to ask yourself if you are willing to assume such a gamble, especially if you have a family to support. The advantage to buying an existing business is that is has weathered that start-up phase, has a degree of stability, an employee and customer base, and, as a result, immediate cash flow. That means it can pay you a salary and pay off the debt incurred to buy it, assuming you buy it right.
Unfortunately, buying a business is a process that most people are not familiar with; it is unlike any other sales situation. Nearly all successful businesses are sold in an atmosphere of absolute secrecy. Why? The owner does not want anyone to know that their business is for sale. They do not want their competitors gleefully wooing their best employees and customers alike. In fact, 80 percent of business owners who may be nearing retirement do not engage a broker to help them sell their business for fear their plans will become public. Even when contemplating selling, they put off any action that could be detectable. What does this mean for the buyer?
Remember the law of supply and demand. For successful businesses, it is now and always has been a “seller’s market.” In fact, so few good businesses are available through brokers that when they do appear, buyers bid against each other to snatch them up.
Inexperienced buyers often use up their nest egg for living expenses while looking and miss out on the few “good ones” by not acting immediately. They look from broker to broker, but never see the quantity of deals they need and want – much less the quality. Finally, in frustration, they either settle for a business that doesn’t fit, or give up and take a job that also doesn’t fit.
So how do you get into the 3 percent group? A smart buyer can outsource this complicated search process to an experienced professional who will find the other 80 percent of business owners. Once a good opportunity is found, they can rely on the broker’s expertise and knowledge to help them make an informed decision. But beware. Unlike the “what’ve you got?” approach, results of a retained search may overwhelm the buyer with options. Results are astounding in comparison.
Recessionary times mean more buyers, more demand for the same supply Yes, financing is harder to get, but rates are lower so cash flow can more easily pay debt service on a better business than ever. And if the business – and your plan – is strong, you can survive the recession and enjoy a strong business for years to come.
Joe Warner is a certified business intermediary with Sunbelt Business Advisors in Overland Park.
To submit a business column, e-mail Chris Rodgers at crodgers@sunpublications.com.