Home – New Forums New here? Share your story Help with which business

Viewing 9 posts - 1 through 9 (of 9 total)
  • Author
    Posts
  • #1235813
    Learningman
    Participant
    • Total posts: 2
    Up
    0
    ::

    Hi all, love this forum !

    I am in my mid 50’s and as an IT Executive looking to plan my departure from the corporate world. It’s been great to me but really wanting to have more freedom to select my destiny.

    I am divided between purchasing an existing business or starting from scratch.

    My Goal is to produce $250K per annum NET and have spent months looking for an existing business and not really come across anything where I can add value. I have searched for business up to $1Million.

    Anyone else been in this situation that can provide advise ?

    #1235818
    Paul – FS Concierge
    Keymaster
    • Total posts: 3,488
    Up
    0
    ::

    Hi And Welcome to Flying Solo It is great to have you!

    Thank you for joining our community and posting.

    I bought my businesses so I went through quite of process of learning before it all happened.

    12 Years later and I am still happy.

    I feel you should learn about business valuations – what you can get for your money in different industries and see if there is an interest and a skills fit.

    Barriers to entry and risk seem to be the 2 most prominent components when assessing value. The higher the risk, the lower the value. The lower the barriers to entry, the lower the price point.

    As you can see already, your criteria don’t relate to how the market works (eg, your tax position will be different to others, so it is completely irrelevant to what a business is worth) so educating yourself would be a great first step.

    The next thing I would look at is scope for growth – look for businesses you feel you can add value to and those that you can scale with minimal capital expenditure.

    You may not meet your financial goals in year 1 but over time instead.

    Let us know how you go.

    Cheers
    ~Paul

    #1236088
    Mario
    Participant
    • Total posts: 13
    Up
    1
    ::

    Hi Learningman

    Welcome. I’m new here too, but have found the community welcoming and helpful! Hope you find the same.

    Building a business from scratch will be a hard slog. You’ll have to build up your clientele. That could take a long time (years) before you get the income you want. That’s one of the disadvantages of starting a business. There are a lot of things to learn and take care of, not just the technical side of the business. You’ll have to learn and do as you go. This is a huge time drain. I don’t know what business you’re intending on getting into, but a short list includes:

      sourcing suppliers
      operations
      keeping track of your accounts
      marketing
      staff
      administration
      equipment leases/purchases
      upkeep of premises
      legal and government compliance
      WHS
      marketing

    It makes buying a business an attractive choice. Most of the work would have been done, leaving you mainly learning how to run the systems that are in place. There are pitfalls though.

    My wife and I bought a business that looked good on paper. After running it for a while, we found that some of the income was coming from customers that the previous owners had diverted into the business from their other business. Soon after the sale had gone through, those customers stopped coming to us. Not nice.

    If you decide to buy a business, I’d suggest getting a business accountant to check through the books, and for you to check for possible ways that the income could be artificially inflated. Where are the customers coming from? Why did they choose the business?

    Look at how thorough the systems are. If the systems aren’t documented or are non-existent, avoid the business.

    Anyway, there’s a lot to cover and I might just be telling you what you already know, so I’ll stop now!

    Let us know how you’re going.

    Cheers
    Mario

      Cheers Mario
    #1236089
    Butters
    Participant
    • Total posts: 4
    Up
    1
    ::

    Hi Learningman,

    welcome and good luck. I have done both as in bought a business and also started couple of businesses from scratch. As the earlier posts suggested, it is far more challenging to start a business from scratch. That’s not to say you shouldn’t do it that way but just be aware, that it will take more time & resources to go down that path!

    If you do decide to buy an existing business, ideally you want to spend some time involved in the operations of it to gauge a thorough appreciation of what makes this business tick and how you can add your flair to it to see it perform better BEFORE YOU SIGN THE DOTTED LINE OR HAVE AN EXIT CLAUSE 1-3 MONTHS AFTER SIGNING.

    I am one who is attracted to businesses that are clearly under performing for any number of reasons and are therefore being sold at a much lower rate than their upside potential and I can easily see where I can add value. To find those businesses, you need to narrow your search for businesses in select industries that match your interest and skill sets and then start doing the ground work and you will eventually find a business that ticks all your boxes.

    good luck,

    Mark

    #1236099
    Paul – FS Concierge
    Keymaster
    • Total posts: 3,488
    Up
    0
    ::

    Hi @butters

    Thanks for a great reply!

    Can you share more about an exit clause? Presumably, the whole purchase price would need to be in Escrow for the whole period or am I mistaken?

    Thanks also for your reply @Mario

    Cheers
    ~Paul

    #1236127
    Butters
    Participant
    • Total posts: 4
    Up
    1
    ::

    You will need to have a decent solicitor who can ensure your sale of business agreement includes a clause along these lines . Ideally you’d aim to pay a minimum deposit of say 5 or 10% and then balance of purchase price to be paid AFTER YOU have opportunity to work in business alongside the current owners for a period of at least 30 days. During that time you can clearly observe the day to day operations to assess whether this business meets your needs and you can also hopefully pick up on any inconsistencies as mentioned earlier where the business owner is funneling his own clients sales into this business to prop up the sales / valuation.

    Worst case scenario is that you decide this business is not for you and you forgo your deposit ( a decent solicitor should ensure you will still get your full deposit back) but if not, at least you have not dropped all your purchase price!! GOOD LUCK!!

    #1243182
    jahansiddika
    Participant
    • Total posts: 2
    Up
    0
    ::

    Congratulations on wanting to control your own destiny. I completely understand the desire for more freedom because corporate life can be exhausting. Anyway, you haven’t found any businesses you think you could benefit from. In that case, it might be worth starting from scratch. It might be a little scary, but you have the skills to make it work. Have you considered consulting with a business expert? They could give you solid advice on what makes the most sense: buying an existing business or starting a business from scratch.

    [Mod Edit To Remove Promotional Content]

    #1243870
    Tony Manto
    Participant
    • Total posts: 581
    Up
    0
    ::

    Although buying a business seems more expensive than starting your own. You have to consider opportunity cost.

    How much income will you lose by starting your own business? If you can buy a business that is earning $150k as an example. It could take you up to two years to generate that level of income.

    Option 1: Two years at 30 – 50k per year = 80 to 90k
    Option 2: Two years at $150k = $300k?

    However, if you do buy a business, make sure the owner stays in the business for at least 12 months while transitioning. This way, customers get to know you. I would factor in you could loose 30% of the business in the changeover. If you have the funds, buying a business is much easier.

    #1244380
    DesignCosmos
    Participant
    • Total posts: 1
    Up
    0
    ::

    Thanks

Viewing 9 posts - 1 through 9 (of 9 total)
  • You must be logged in to reply to this topic.