08 Jan Around the Web: A Week in Summary
A recent blog post from Transworld Business Advisors entitled “How Do I Buy an Established Business” provides a brief overview of the actions and considerations a prospective buyer needs to take in order to engage in the business buying process.
In regards to becoming an entrepreneur there are two main steps to becoming the owner of a new business:
Deciding to Buy a Business – Buying an established business is less of a risk than starting a new one from scratch. While most startups fail within the first five years in business, and require a few years of around the clock work to gain traction, an established business will already have gone through these rough stages and no longer carry the same level of risk.
Finding the Right Business – When you begin looking at prospective businesses for sale, it’s important to consider what is the right fit for you as the owner. Consider things like your location, skillsets, interests, schedule, and finances to narrow down the type of business you’d like to buy. You should then consider each potential business’s current financial health, liabilities, projected potential and weigh the possible risks with the benefits and opportunities it can provide.
A recent article from Forbes entitled “10 Common Mistakes To Avoid When Exiting Your Business” provides a detailed list of the most common mistakes that business owners make when they consider retiring from their role as owner.
Since, for the majority of owners, their business is the largest asset they own, it’s imperative that exit planning is done well in advance to ensure a smooth exit that will align with the individual’s retirement goals. Unfortunately, many owners underestimate the importance of this step and transition specialists warn them against making these top ten common mistakes:
- Being too emotionally attached to the business
- Not understanding how buyers evaluate the business
- Failing to understand the importance of a committed management and leadership team
- Not preparing for life post-sale
- Not properly evaluating all exit options
- Not facing family issues head on
- Not understanding and planning for the new economy
- Not cleaning up bothersome contingencies
- Working in the business and not on it
- Being overwhelmed by all of the moving pieces in an exit
A recent blog post from Business Enterprise Institute entitled “3 Things All Valuable Businesses Have” explains the three characteristics that are present in every valuable business.
- Next-Level Management: Every valuable company has a management team in place that can run the business without the owner involved. Even more valuable is a team that is able to take the business further than the owner themselves. This guarantees that the company will still maintain success after the owner is no longer with it.
- Operating Systems That Improve the Sustainability of Cash Flow – Written documentation of processes that anyone can follow and implement are invaluable to the future of a business and to a buyer.
- A Solid, Diversified Customer Base – Having a singular or a few customers who provide a large percentage of your revenue is high risk for any business. For the benefit and safety of the business, and for an increased value, having a diversified customer base means that if a client or two leaves then the business won’t suffer potential demise.