Surreal Entrepreneur

While we’ve been comparing and contrasting the benefits of buying into a franchise I’m positive that you’ve started forming opinions on what it must be like to buy a pre-existing business and what the benefits of that could be. You also probably know my standpoint on it, but just so we cover all of our bases… let’s discuss.

Every once in a while as you begin to plug yourself into the entrepreneurial environment that surrounds you, getting involved in chamber of commerce meetings, socializing with other business owners and entrepreneurs, meeting influential members of the community, you will run across opportunities to purchase business that are currently running. This is not uncommon. Some businesses fail and become sort of like foreclosed properties, with a little bit of love, these businesses could be magnificent iterations of themselves again, or they could be lemons. You also might encounter business that have been placed on the market due to death, or other personal problems. There is a large list of reasons that businesses could be on the market, but the simple premise is that you are buying the keys to a business that has already been established, that may include staff, inventory, rented or owned space, previous advertising contracts, etc.

I’m probably not giving the prettiest and unbiased outlook on this, so I’ll start with the positive aspects. A thriving business could already have a very solid share in the market, established customer base, advertising schedule, great relationship with suppliers, positive income and low debt. The business could have well trained employees who are dedicated to carrying on the way things have been going. There is a lot less work involved because you don’t have to start the business by gaining capital, market research, establishing employees and inventory, permits, licenses, you know… the fun stuff. I have seen the purchase of an existing business turn out well. A friend of mine purchased an exotic water bottle supply company and simply walked into what I like to call “Mail Box Money”. He took a percentage of account executive’s sales and did some scheduling and signed paychecks… This seems too good to be true, but the previous owner had done a wonderful job of setting up a well oiled machine before his untimely passing.

So, now that the positives are out of the way, let’s look at the dark side. The business could feel like a great idea, but just like a used car, you might not find all of the problems by looking at the vehicle and taking it for a spin around the block. Some businesses get in trouble and before the owner takes a big loss, they sell. This leaves some unsuspecting chump in the crossfire of a failing company. I’ve seen several businesses that were on the brink of bankruptcy because of poor relations with the community, they were great ideas, but located in the wrong market. There is a myriad of reasons that one should be weary about buying a business, but my main reason is that we are entrepreneurs. We thrive on risk and experience. Of course it would be a great experience to run a thriving business, and it would certainly build confidence; however, I believe that there is only one way to be successful, and that is by making the mistakes and learning, what a better way then by starting small and learning on the way instead of expecting to just walk into a perfect situation and perform perfectly.

In summation I would like to assert that I am certainly not an expert, and I believe that buying a business, like any purchase, falls into the asset or liability category. It also takes away the ability to be innovative from the ground up. But if you are presented with the opportunity; do the research, don’t just thumb through the financials. Dig into every nook and cranny to find the truth about the business before even thinking about purchasing it. The option to buy a business is certainly a considerable one, now to find the right opportunity is the difficult part.