What Are You Looking for When Buying a Business? FYI, I Have Never Own a Business before

Ldiend on 02/10/2017 - 13:15
Last edited 02/10/2017 - 15:31 by 1 other user

Hey all,

I am in my early 30s, single, paying mortgage for my own house, currently working full-time in a company and on my way to jump ship before I am too old/late to run a business.
I am thinking of buying a business ($50K - $200K range). Been looking around these three websites:

• www.seekbusiness.com.au
• www.gumtree.com.au
• www.commercialrealestate.com.au

and I have a lot of questions in mind, around

1. I am still not sure tho whether or not I should contact the business broker?
2. What type of businesses are considered good for newbies?
3. Business/commercial rental agreement, do I need to put my house as collateral?
4. is Business loan a MUST?
5. BYO new business or buy existing business?
6. What are the questions people normally ask the previous owner when buying a business?

It's more like a newbie questions but I am not quite sure where to start

thanks,
D

• 

  Halo375 on 02/10/2017 - 13:22

  +1

  Look at the financial health of the business, the industry outlook, the value of the business resources (people and things) as well as any core competencies they may have. I'd ask why they were selling and then ask them for the truth (which you still wouldn't get). I'd then look at the competition and try to see whether there are any gaps I could exploit.

  I'd ask myself if I had the skill to turn around a business and a commitment to work 20 hour days on a venture that would probably have a very, very high chance of financial ruin.

  I'd also read this recent and very relevant post:

  https://www.ozbargain.com.au/node/332679

  • 

    diend on 02/10/2017 - 13:34

    Thanks, Halo!

    that actually what drives me posting this question, I hope I can get in touch with @ozlite as I am keen to know more and hope that he is willing to share some tips to me.

  • 

    diend on 02/10/2017 - 13:39

    can you trust a business broker?

    • 

      Halo375 on 02/10/2017 - 13:43

      Can you trust anyone? If you're paying someone for a service and they're respected then you shouldn't have an issue.

      Don't worry yet about the fundamentals of acquiring a business - you'll find plenty of people and businesses willing to help you with that.

      What you need to do is actually figure out:

      What you're good at.
      What you could do better than everyone else.
      What industry you'd like to be in.
      How are you going to stand out?
      How does your education and experience help you to run a successful business?

      And most importantly - what are you prepared to risk?

• 

  dcep on 02/10/2017 - 13:23

  +3

  don't do it.

  you sounds like you want to start a business just because other ppl is doing so.

  you don't have a passion
  you don't have a plan
  you don't have a drive

  you sounds like you want something easy, quit your 8-5 day job, buy a business from website you found, start making money and retire ?

  • 

    diend on 02/10/2017 - 13:29

    Thanks for the suggestion tho,

    It's true that I am in my comfort zone now but It's actually quite the opposite, most of friends are doing 9-5 job and I have been in my industry for quite sometimes and I think that I should at least TRY going solo, and run my own business before I have children.

    I am ready to do 15 hours a day, 7 days a week for this!

    I figure out that I would be extremely difficult for me to run a business while having kids and there's no better time for trying, the more I delay the decision, the harder it gets.

    • 

      diend on 02/10/2017 - 13:33

      and yes, It's somewhat true that:
      - I have passion but it's just not within running a business (at least not yet).
      - I don't have a plan
      - I don't have a drive.

    • 

      dcep on 02/10/2017 - 13:40

      +1

      good to hear you're ready to commit.

      if you can let money alone be your driver then you can be opportunistic by picking up business that you think you can add value on.

      else find something of your own passion and upskill yourself, build and grow the business from scratch.
      you won't regret on the time/tears/money that you put on it because it's your passion afterall.

      • 

        diend on 02/10/2017 - 13:42

        It's not so much about the money I would say.
        I don't mind earning less than what I currently get tho, even if it's just enough to cover my bills.
        I am more into the financial freedom side of it!

        wouldn't buying a franchise make it easier for someone who has never own a business before?

      • 

        Halo375 on 02/10/2017 - 13:44

        +1

        @diend: Well that's the risk isn't it? Franchise might be easier for you, but you're paying someone else for their idea and their resources. Franchise contracts are normally incredibly restrictive - you must use their operations, you must pay their fees, you must buy from them, you must give them a cut of your profits, etc. etc. It's a brutal business being a slave to someone else.

      • 

        diend on 02/10/2017 - 13:46

        +1

        @Halo375 are they like "working full-time" in disguise?
        I have to talk to other people and read more about these sectors.

      • 

        Ughhh on 02/10/2017 - 14:31

        @diend:

        I don't mind earning less than what I currently get tho, even if it's just enough to cover my bills.

        That wouldn't be such a bad outcome, considering the rate of new small business' closing/going bankrupt within the first year is 1 in 3, and similar rates for the following years. Are you okay with not making a salary for a few years?

        I suggest watching kitchen nightmares. Even though it's a tv show, Gordon Ramsay has some really good business advice. It'll also give you a glimpse of the nightmare in running a business as a headless chicken.

• 

  Third_Gear on 02/10/2017 - 14:11

  -1

  You can run/own a business at any stage of life. The fact that you have to ask question 1 though worries me…

• 

  robbo135 on 02/10/2017 - 14:20

  -1

  Don't do it ! If you're asking these questions you are going to be taken for a ride, plenty of vultures out there who'd be happy to sell you a lemon…

  Have you thought about the downsides? Business goes bust, savings gone, mortgage to pay…

• 

  JetLi on 02/10/2017 - 16:25

  +1

  Again, don't do it. You should be focusing on maximising your career after all the years of work experience, not risking your life savings on running your own business. My take is, the majority of small businesses fail and in respect of those that succeed, alot of them just tread water and financially they would have been better off staying in their 9-5 jobs.

  • 

    toristo on 02/10/2017 - 19:16

    I agree with the don't do it part, but I disagree with the focus on the career.

    If you were passionate and had a clear vision of what you wanted to do, I'd probably think differently. The fact you're on ozbargain asking for guidance, it does sound like the thinking is a little premature. Someone will end up selling you a bridge.

    There's plenty of reasons to step away from a very successful career and starting your own business. I'm not sure you've ticked those just yet by the sounds of the post. JetLi is right about the small businesses failing, but that doesn't mean nobody should try. Research, research, research, investigate, run business cases, keep working, do more research, more business cases, and only when you start to doubt yourself and whether it's a good idea should you start to think about seriously doing it. The inner voice of concern will help keep you safe. If it hasn't kicked in yet, you haven't done enough research.

• 

  Kail on 02/10/2017 - 17:51

  +2

  Personally I would suggest you pay off your mortgage before looking at investing in a business.

  You could always look at low risk stuff like hobbies. You could write a book, or learn a craft then sell home-made items online or in market stalls on the weekends. If it goes well you could try turning your new passion into a small business and grow from there.

  If you are unhappy in your current career you could look at a career change to see if you can find something more flexible but still stable enough that you will be confident you can afford your mortgage repayments?

  Whatever you decide to do I wish you the best of luck with it.

• 

  MrHyde on 03/10/2017 - 07:13

  +1

  As someone who started his own business, the one thing that makes the biggest difference is passion. Don't start a business in an area where you have no passion. Working 16-20 hours a day in such an area will just make life a living hell.

  The other aspect to keep in mind is that most small businesses are just a way to buy yourself a job. The barely break even and the number of businesses I've seen where the annual profit is like 40-50K and that does not include the salary of the owner - I just go, why bother - especially if you are leaving a good paying job to do that.