If I had a dollar for every time I have been asked “how can I buy a business that is guaranteed not to fail?” , I would be buried in dollar bills. Obviously, every prospective business buyer wants to acquire a business that is guaranteed to succeed.
Unfortunately, the only business where that can happen is the one type my late friend Jerry Efros says is fail proof – a toll booth - and personally, I have not seen any listed on this business for sale website.
The only way to be certain you will not fail is by not purchasing a business at all. While you won’t fail, neither will you succeed.
Further, success goes beyond the business and is deeply tied into the buyer themselves. A large part of the equation will come down to the buyer betting on their ability to take over and successfully run the business. It is a matter of confidence and something that should not be taken lightly.
Not everyone is cut out to be a business owner. I recall one situation a few years ago with a particular consulting client who managed to find fault with every business we reviewed. While many were in fact not worth buying, several were what I believed to be very solid companies. After one particular meeting with a business that had excellent fundamentals and solid historical financials, he asked me whether he could be guaranteed the business would succeed after a sale.
He went on to explain that before he purchased a business, he would need assurances it would never fail. He actually felt that if he were to make a mistake his wife would probably divorce him. Can you imagine trying to buy a business with that hanging over your head?
At that point I told him that I truly did not believe he had what it takes to ever get to the finish line in the business-buying process. I also explained that even if he somehow managed to close a deal, he did not have the mindset of a business owner because you cannot operate a company if you are in fear of ever making a key decision. That is something you do all day, every day as an owner. He said he was “shocked and highly offended” by my comments. Interestingly enough he decided instead to become a business broker.
The reality is that every business has warts. Perfect businesses do not exist (except for the toll booth). There is always a degree of risk involved with buying a business. The goal therefore is to mitigate the risk by diligently analyzing and business you consider purchasing and by paying a price and negotiating deal terms that make economic sense.
Above all, the business has to be right for you. There are plenty of good businesses, but if the wrong person buys it, it will quickly decline. Similarly, there are loads of good businesses currently run by the wrong people; these are the gems! The key of course is making certain that your skill set matches what the business needs in order to be successful in the long term.
Don’t look for guarantees; instead, seek out a solid business that can transition well to you as the new owner and one that can grow under your leadership.
To your success!
Richard Parker - The Business Buyer Resource Center™