20 November 2015
5 Steps to finding the right business
Deciding to invest in a business is a big step in itself; it’s a lot of money and a lot of responsibility. Once you have decided to take the plunge, your next step is critical – what business do you buy? Is it an independent business or a franchise? This guide will help you make the right choice for you.
Be prepared…
It’s no secret that the world is changing, and the words ‘digital transformation’ are on everyone’s lips. Before you commit to a business, you should have a clear picture of how you’re going to evolve the business, stay competitive and stay relevant. If the business is a franchise, ask the franchisor about their future-proofing strategy - if there’s no plan in place, it could be a warning sign.
Investment vs. career
It seems simple, but know whether you want to buy the business as an investment, or actually work in it day-to-day. The type of business you choose will be very different if you are buying it as an investment not a career. Smaller franchises like a coffee cart business will generally require you to be an owner/operator, while some larger franchises are better structured for investors. Most independent businesses will require you to work in the business so if you take this path, you should choose something you’re passionate about.
Know your own mind
It’s important to understand what you want to achieve from the outset. Do you want a business that will make a huge profit in a short amount of time? One to hand down to your children? An individual business, or one with the potential to expand? The other thing to consider is how risk averse you are. If you’re willing to take a gamble and bet on yourself, an independent business could be for you, but if you prefer to play it safe, you might consider a franchise which takes some of the risk out of buying a business. Without a clear picture of what you want from the business, it’s impossible to see that vision realised with your purchase.
Mind the gap
Be confident with the skills and knowledge you bring to the table, and even more importantly, know what you don’t know. Where do you already have the skills (many are transferable from other industries) and where do you need to grow your skills? If you’re buying an independent business, you may need to seek external training to upskill in particular areas and bridge this gap.
Be budget conscious
Knowing how much money you have to invest in the business will automatically discount a lot of options. The trickier part is figuring out which of the businesses within your price range have the capacity to earn you more money over the long term. Some franchises are accredited by banks, which makes it easier to get a loan to buy into that business. The best place to start is to do the sums on how much cash you have upfront and how much you could borrow. Then ask the right questions about the earning capability of each business you’re considering so you have the full picture!
