Tuesday, March 6, 2018

How to Stop Self Sabotage!

Buy A Business Without Your Own Money

Frequently, people ask me should they start a business from scratch or should they buy an existing business. I have owned four businesses over my career. I started my first business in my twenties and was able to grow it to eight million in revenue with over 50 employees. My partner and I were the original franchisees for Garagetek in the greater Chicago area which was almost the equivalent of a start up. We also purchased a dormant direct mail franchise in New York City, built it up and sold it. For the past six years I have been working as a business broker at AJR Business Advisors which I also founded.

As a business broker I make my living selling existing businesses with positive cash flows. I do not get involved in start ups or sell new business offerings. Although some of my businesses that I started from scratch were very successful I have very strong feelings on the subject.

Though I will be accused of being biased, I usually recommend that people buy a business rather than start one from scratch. The only time I recommend starting a new business is if you have a very unique idea for a business which doesn't exist. I also will advise you that you need to be well capitalized because many great new businesses have failed due to inadequate finances. There are some other rare occasions where I would give someone the green light on a start up.

The main reason I recommend purchasing an existing business is to minimize the risk one takes. When someone wants to be in business for themselves they are taking a sizable risk. It is well known that so many small businesses fail within the first five years. By purchasing an existing business you are reducing the risks you are taking with your capital for the following reasons:

* An existing business has a proven track record.

* An existing business has customers.

* An existing business already has employees.

* An existing business has relationships with vendors.

* When you buy a business you acquire the hard assets which include furniture, fixtures, and equipment. Because they are part of the purchase price they are usually being acquired at a substantial discount over buying new.

* In most transactions the seller will provide training during a negotiated transition period so you're not starting from square one.

Some experts will advise you to buy into a franchise if you want to be your own boss. This too is a way of minimizing risk because the failure rate of franchisees is usually lower than independent start ups. I would agree with this, but I would take it one step further. Buy a franchise "resale" instead because you will have all of the advantages previously outlined and the ongoing training and support of the franchisor.

Please note that buying a business is certainly not a walk in the park. One must perform careful due diligence to make sure everything that is being advertised is accurate. Financial records have to be examined and verified. One must make sure that they look at all internal and external factors such as employees, competition, industry changes, etc. I always advise business buyers not to purchase a business unless they feel they can improve upon it. Very few businesses can stay on cruise control. If you are not growing the business it will most likely decline.

It is all about risk and minimizing that risk. The goal of a business owner is to grow and prosper. Unless you have an idea and capital for the next Amazon or Google, buying a business will give you a better advantage over most that start from scratch.

Howard Greenberg works as a business broker in New Jersey and New York. He is a principal at AJR Business Advisors located in Rochelle Park, New Jersey. Howard represents owners of privately held businesses in the sale of their companies. Prior to starting AJR business Advisors, Howard was one of the founders of Axiom Design Systems which was one of the leading graphic communications firms in New York City. Howard has also owned two franchise businesses. Business owners interested in selling their businesses in New Jersey and New York can reach Howard Greenberg at http://www.ajrba.com/.