Deciding which business is right for you
Mon, 17 August 2009 AEST
Email
PrintFrank Sirianni
Wrong answer!
If you do not have a clear picture of what you are looking for, you'll be unlikely to find the right business.
1. Are you ready to buy?
The first step is deciding are you ready to buy?
Not all technically competent professionals will make good business owners. You need to:
a. Understand why you want to own a business? What's your motivation to buy?
b. Have a clear picture (specification) of the type of business you want to buy.
c. Assess and determine what is a good business for you?
d. Realistically assess if you are ready to buy?
The third point means assessing your strengths and weaknesses to determine what types of situations or businesses you will best suit. Identifying your strengths is crucial, but recognising your weaknesses is just as important.
You will fly and be very successful if the business you choose builds on or exploits your strengths and does not call for areas or skills where you are weak.
Be honest with yourself and don't try to be something you're not.
The last point looks at whether you are ready for the commitment required to own a business. It's a tough gig that requires long hours and stamina. It also means having the required skills and experience.
As a fully qualified professional, you have spent years building your technical knowledge. Do you have the same depth of experience in regard to business ownership?
2. Do you have finance in place? Can you afford to buy?
In the light of the current credit and economic environment, it has become increasing difficult to borrow from banks and lending institutions.
To buy most businesses, you will generally need between 25% and 40% in equity. This could be in the form of cash or borrowing capacity against other assets (i.e. your home).
So, for example, if you have $400,000 in cash, you can afford to buy a business with a total purchase price of between $1 million and $1.6 million.
Remember to allow for fees and charges (i.e. legal fees, due diligence, stamp duty [if applicable] and loan establishment fees).
Next, you must understand that there are a lot of good businesses that are being run by the wrong people. The application of the right skill to the right business set can truly grow a good business into a great one.
What next?
If you have completed the above two steps and feel that you are ready and know what you can afford, the next steps are:
1. Commence your search
Use www.practice4sale.com.au to search for businesses. You can also load a wanted listing.
However, also be proactive:
- Talk to business owners who own business like the ones you are looking for
- Contact business brokers and let them know what you are looking for and that you are ready to buy
2. Build you ownership skills
Medici Capital runs Ownership Ready Courses in most states. Join the next course!
Read books on business ownership and management. Think about other courses.
3. Work to a plan
The average buyer takes 2 to 3 years to find and buy the right business for them. Many never buy!
It's a journey and you need to work to a plan if you are going to succeed.
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