Choosing the Right Business

Choosing the right business

Despite the many advantages that purchasing an existing business offer, a strong financial and operational track record alone is no guarantee that you will experience similar success. Choosing a business that fits your interests, background and experience is of paramount importance. By way of example, you may not want to purchase a hospitality business if you have no experience in dealing with the public, or an engineering business if you are a pastry chef. Below are some suggestions to help you successfully locate a business that suits your background, skills and desires.

1. Choose a business where you have an advantage by way of either qualifications or experience. Business is highly competitive, and you need to be at least as good as your competitors.

2.Choose an occupation that you enjoy. Small business ownership often involves long hours, and requires great enthusiasm to motivate staff, and deal successfully with clients. This can become very tedious if you are not happy at it.

3.Check the Seller’s reason for selling. There are many legitimate reasons for selling a perfectly good business, such as retirement, marriage or partnership difficulties, health issues, other business interests, or even just simple “burn-out”.

4.Understand clearly the nature of the business, and how much capital is required to run it. In addition to the cost of purchasing the business, you need to have sufficient working capital to finance inventory, accounts receivable and overhead costs. Working capital requirements differ substantially between retail, wholesale and manufacturing companies.

5.Understand the cash flow characteristics and any seasonality. A year-end profit does not necessarily mean that there will be cash available at critical times to meet necessary costs, such as interest, taxes and your living expenses.

6.Ensure you have the means to purchase the business, the experience to operate the business and funds to finance any planned growth or development. Sunbelt can assist with this analysis.

7.Try to get to know the Seller to gauge whether you can successfully “fit into their shoes” and run the business at least as well as she or he did.

8.Avoid major changes to the business during the transition period, unless you are very sure of what you are doing. A smooth change over with minimum customer impact is the usual road to success.