There are tens of thousands of small businesses available in today's business-for-sale marketplace, representing dozens of industries and a multitude of market sectors. But not every type of small business is right for every buyer.
Before you start looking at possible businesses to buy, it's essential that you think through key personal and market factors. These are the key factors that should drive your selection process and define the types of businesses that you will evaluate.
Getting this right--i.e., finding the right business for you--will be a big determinant of your success as a new business owner. Getting this wrong can quickly turn your dream of owning your own business into a nightmare. As such, in addition to the thoughts below, it's also a good idea to talk with a qualified business broker whom you trust. They will help you answer the questions below and target your search in a way that maximizes your chances of finding a successful and personally rewarding entrepreneurial path.
5 Tips for Determining the Type of Business That Is Right for You
Buying a business is a process. During the exploratory stage, much of your energy and attention will be focused on determining whether or not small business ownership is the right career path for you and your family (don't underestimate the importance of this very first step!). After you have made the decision to pursue business ownership, there are several other important factors to consider before you settle on an industry or market sector:
Since you will be investing a significant amount of time in your business, you should narrow your search to an industry that interests you and that is in sync with your desired lifestyle. If you're unsure about what type of business you want to invest in, talk with small business owners across multiple industries to gain additional insights.
It's not uncommon for start-up entrepreneurs to build a business around a personal hobby or passion. As a business buyer, you may not have that luxury, but the business you acquire must be situated in an industry that you can immerse yourself in for an extended time period and be content doing the type of work that is required of a business owner in that field. One of the key drivers of success is enjoying and being interested in what you do!
Skills, Talents, and Experience
Passion alone won't guarantee your success as a small business owner--you need to be honest about your skills and experience. For example, if you have never worked in the food service industry before, it's unlikely that you will be a successful restaurant owner until you have accumulated experience in the field.
Although it's possible to succeed without previous experience, you should consider working as in your chosen industry before you plunge into an ownership position, even if it means working as an employee in someone else's business before you invest in your own operation.
You will also need to consider your capital position since some industries require higher levels of investment than others. For example, manufacturing operations usually require much more capital to acquire than small consulting firms or businesses with fewer assets.
It's critical to make sure you have enough available capital to seriously pursue an acquisition in your chosen industry. Although seller financing may be possible for a portion of the purchase price, a thorough evaluation of your current capital position can help narrow your search to the business opportunities that align with your financial means.
Market research, including an evaluation of short- and long-term industry forecasts, is essential in selecting potential business acquisitions. Are there opportunities for growth or is the industry in decline? It's important to identify an industry with the potential to increase the value of your investment.
Additionally, you will need to examine the market in your geographic area to determine whether it is already saturated or if there is room for you to compete and grow your company. Consult with a business broker for help in evaluating the condition of the regional marketplace as well as local trends that could impact your success.
Small business buyers often overlook the importance of their existing business networks in the search process. Whether you know it or not, your current business network is an asset that can be a valuable source of customers and strategic partnerships. Although it's not necessarily a deal-breaker, buying a business in an industry outside of your existing network will require you to build a new network from scratch, which could delay the achievement of key growth benchmarks.
Finding the right small business is challenging. But the rewards of owning a business can far outweigh the costs--especially if you let your personal interests and professional capabilities inform your search.