Are you ready to buy a business?
Are you ready to buy a business? It is many people’s dream to own their own business and have no one but themselves to answer to come Monday morning, but ask the 50 per cent of business owners whose businesses fail within five years of opening and they will tell you just how hard it is to make it work.
Before you make the move from daydreaming to actually owning your own business, make sure you are ready to buy a business with these considerations in mind:
Do you have a real and researched business plan?
Whether you are starting an entirely new business or looking to buy an existing business, it is fundamental for your success that you have a comprehensive business plan that is mapped out, formatted, printed and bound for you to reference at any given moment. Not only does the visualisation of your business plan make it easier to move forward as a business owner, but a business plan is fundamental for securing finances and potential investment from partners.
What do you put in a business plan? A thorough business plan typically includes a significant section about the business itself (how it is structured, what services/products it offers, how staff are organised, your assets, ABN and insurance information).
Follow this with a detailed section of the market, reflecting your research and projections about how you will tap into your targeted market. Finances make up the second-largest section of your business plan, including how the business will be financed (potential partners) and a thorough run down of expected costs and incomings. Finally, there should be an outline of your growth plan (what markers you set out to measure growth in your business).
Know the market inside out
You ideally want to have previous experience within the industry of any potential business you buy. For example, too many people underestimate the pressures and nuances of successfully running a cafe or restaurant, both of which have their own particular stress points and idiosyncrasies that bring down so many new owners.
If you don’t have experience in the industry, either try to gain it through work experience or do as much research as possible, creating a detailed outline of the industry through interviews and online research. Attend industry conferences and events to glean insights into what challenges the industry faces as well as what opportunities are there for you.
Are you really financially ready to buy a business?
Just as buying a home has a raft of hidden costs that not all buyers are aware of, there are costs of buying a business that potential owners underestimate when compiling their business plans.
Beyond the obvious considerations of overheads (staff costs, stock, utilities) there are the unforeseeable (unless you do your proper research) costs such as repairs and improvements to a business, both structurally (such as new equipment) and in relation to how the business is run (potential new and necessary hires). Remember to account for loan establishment fees, solicitors fees, conveyancing and GST fees, and the less obvious cost of losing staff or customers during the transition of the business.
Acquiring credit as a small business owner is famously hard in Australia compared to historic ease with which homeowners have acquired financing. Be aware of the realities of finding credit in terms of the health of the economy when you do plan to find a loan for your business. Unexpected regulations or fluctuations in the market may either help or hinder your efforts. Being as financially strong as you can be, as well as prepared in your awareness of your industry and the risks of your business, will place you in the best position to find investment or credit for your business.
Are you emotionally ready to buy a business?
Emotional maturity is everything in business, just as it is in relationships.
Finding a healthy work/life balance when owning your own business is integral to the successful management of your business. This is why it is important to not only have experience within the industry, so that you know what you are getting yourself into, but to also be sure that you are at the right stage of your life for such a major investment. Be sure of your emotional strength prior to buying a business, as it will be tested every single day that you own that business. You will find incredible highs as a business owner, which far outweigh the lows, but those lows can be strong enough to challenge the most passionate business owners.
Many business owners start and run their businesses with friends, colleagues, family members and partners as they provide the emotional, organisational and financial support to effectively run a business. Need a holiday to clear the head? You may not be able to do that as a sole business owner.
What is your growth plan?
If you are ready to buy a business, then you know when and how your business is going to end. In other words, you know what the longterm lifecycle of your business will be. It is important to have a good understanding of where you want to see your business go in the future, and when you will want to move on. Knowing exactly when your business will run its course will help you manage your expectations, your plans for the business and your finances from day one.