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Blog   »   January 2016   »   Buying A Business - Part 1

Buying A Business - Part 1

Buying A Business – Part 1

This Blog Is In Two Parts

It is now the start of a new year 2016 and with the feeling of a good year ahead some people are looking at starting or buying a business.

One of the most difficult things is to work out what business to go into. We have shown below some of the areas in bullet points you should be aware of. Remember, the Business Broker and the vendor have one thing in common, that is to sell you their business. Be aware they have a vested interest in the sale, so look after yourself first, second and third.

  • Do you have experience in the industry?
  • Do you have management experience?
  • Is it 7 days a week?
  • Are you looking long term?
  • Are you just buying yourself a job?
  • Obsolescence – will the business still be around and / or viable and saleable in, say 5 to 6 years – for example video shops or car mobile phone installer?

While the above points are not specifically related to finance and what we at Hunter Business Finance can assist with, they are integral to your decision as to what to buy.

  • Do you have experience in the industry?

Some businesses require knowledge of what is involved and require licences to operate e.g. an accountant can’t decide to commence trading as an electrician and vice versa.

Other businesses only (a stupid word which down-plays the real relevance of the effort needed) require the desire to succeed, work hard and learn on the job (for example corner store, take away).

  • Do you have management experience?

Management comes in all shapes and sizes from your ability to make decisions quickly, people skills, financial skills, computer skills etc.  You may not possess all of these, but you can of course pay someone to handle some of these tasks for you, however if your people skills are low or zero, you will struggle in small business for most small businesses are people and service orientated.

  • Does the business operate 7 days a week?

Rule of thumb, if you embark on a 7 day a week small business as a sole trader such as a café or coffee shop, you will in all probability “burn out” after 4 odd years, so your vision should be to work it hard for 3 – 4 years then sell, have a break, and do it again if the desire is still there.

  • Is this to be a long term business venture?

Long term ventures are generally not open 7 days a week for reasons outlined above – exceptions are businesses that employ 15 plus staff and they can and do work on a roster. The ventures in this category are large and varied and depend particularly on points 1 and 2.  Personally I feel these enterprises are the most rewarding financially (in the long run) and personally as you can see the enterprise grow and develop under your guidance and as your expertise develops.

  • Are you just buying yourself a job?

Often we see people spend big money to buy equipment (which depreciates) only to be repaying a loan and drawing a small wage or no wage at all.  Sad but true and not uncommon, so before you buy that truck, dozer or coffee shop, work out the numbers and make sure you are getting paid for your time and effort AFTER all expenses are paid.

After you have made your decision to buy a business that is where Hunter Business Finance comes in.

The blog next month is the second part of Buying A Business and deals with what you need to look at in the financials and what a lender will look at, how lenders evaluate these financials, and what we as brokers highlight and / or downplay.

Posted: 12/01/2016 10:56:03 AM by Hunter Business Finance | with 0 comments

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