By Thom Beckett CBI
In the search for small business ownership, it’s funny how we expect such perfection. Business ownership has many illusions – the first is that you’ll find perfection in any business: the one you buy, or the one you’ve owned for ten years!
Businesses are Human, we forget that they are as imperfect as each of us. There are no perfect businesses; no perfect sellers, no perfect buyers (and certainly no perfect employees!). As a business broker, I softly remind parties all the time that first & foremost the process of buying (and selling) a business is emotional, and thus human. Sure, buyers commonly demand financial reports before they even develop an understanding of the culture or personality of a business. Before buyers ask about employee tenure, vendor strength, customer mix, lease longevity, community profile … they say, “send me the financials and I’ll get back to you”. That’s my first clue that perhaps I’m talking with a shopper, not a buyer of a business.
Yes, financial performance matters in business, small and large, but it’s the WHY that is the real question: . “Why is that business successful, what are the value-drivers?” (You have to study the value drivers.)
The second important question then follows; “Is this business the best application of my strengths & interests?” The weaknesses that you perceive in a business are an opportunity for you to add-value; to put your skills, experience and ideas to use.
Why do you buy a business in the first place? Statistically it’s a much better investment than starting from scratch. A successful business is a case-study gone right. Whether that business generates $75,000 or $375,000 in earnings – it’s doing something right. (In my experience, anything under $60,000 in earnings is still a hobby.)
But “why” you buy a business is not “how” you buy a business. Businesses are inherently imperfect, just like us. Businesses have many moving parts that never perfectly align. Few small businesses realize the Samuel Slater efficiencies that shaped our industrial revolution. Instead, solutions grow from needs, and change is so profuse that the solutions may never realize peak efficiency; whether it is bookkeeping, marketing, production (product or service), or other factors that drive the success of a business. Surely, the process of buying/selling a business itself is inherent with imperfections, just like owning one. It is a process of managing realities – your first lesson of business ownership!
I’ve learned two primary lessons in 25 years of small business:
- Being connected to a business makes success more likely, and more fun.
- The best investment ever made is in your own business. This asset-class alone has outperformed any real estate or stocks/equities I’ve owned (particularly today!).
Statistically, small business sales, and sale-valuations, were up in 2008! With more buyers in the market, and fewer growing businesses to choose from it’s sometimes hard to tell whether this is a buyer’s market or a seller’s. My point is: that doesn’t matter. You are looking for a business today, so find the one that fits you best.
Don’t look for perfection; look for the business that is perfectly you! Before you begin this search; perform an honest assessment of your strengths. With each business you review, look for opportunities to leverage these strengths: either through a seller that embodies similar personal characteristics, or through a business that could really benefit from the strengths you’d bring.