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Preaching Caution to Business Buyers

May 21, 2012

Let’s get one thing out of the way:  We are never wrong!!!

We thought we were wrong once; but we were mistaken.

Okay, enough for the lame jokes on a Monday morning.

In a recent public bulletin board, we were soundly taken to task for one of our comments.  The question was whether a Pepperidge  Farm Route was a good investment.  Our answer was that we did not have direct experience, because we had never represented one; and the reason we had never represented one is that none of the Route Sales opportunities we had been asked to sell were worth anything, and we declined to represent any of those Sellers.  Our comments suggested that the ones we have seen were loaded with expenses, and very little profit.  And that was before gas went to $3.50+ per gallon!  We further stated that we had heard of a number of complaints about owning such businesses, and not a single success story.

This is not to say that NO Route Sales operations are worthwhile.

Some of the later respondents were positive, most were not.

The criticism we personally received was from a writer that responded two (2) years after the original question, and our almost immediate answer.  He was obviously angry that we were so negative about his chosen line of work and we apologized, since we certainly were not attempting to be insulting, which is apparently how he took our comments.

Our response to the question originally posed did not and does not suggest that Route Sales are terrible investments.  But neither are they representative of a pot of gold, for any given Buyer.  Our Critic’s own private correspondence with us suggested that his Route was a suburban operation, with somewhat specific market characteristics.

And THAT is really the point!

There are MANY good businesses out there.  And there are MANY dogs!

One guy’s good fortune is not something you, as Buyers, can take to the bank.  Because ONE GUY did well, it does not suggest that the entire market for Route Sales is like hitting the Lottery.  Wolgang Puck has done incredibly well with Restaurants; does that mean every Restaurateur is going to hit it rich?

And maybe our experience is too limited to find the real bell ringers, among Route Sales.  But again, that is the point:  You cannot assume anything, and as we have said over and over, in various posts here and other places, YOU HAVE TO DO THE RESEARCH!  You have to know what you are buying or starting, and you cannot listen to only one guy – us, or anyone else – in making a singular decision that may mean the biggest investment, and the biggest commitment of your professional life!  And Business Plan can be the tool you use to do that kind of research.  (See our posts on Business Plans.)

Knowing any business in depth and in advance is almost always the key to avoiding disaster, and paving the way for real success.  This is why we always suggest that your first involvement in owning your own business should play on your own business experience, rather than something about which you know nothing.  And we can provide you with tons of disaster stories about otherwise intelligent people that have ignored that advice.

And there are other situations where, though the Buyer had background in the field he chose, he did not have the business background to make it work.  Like the Real Estate Agent that could not manage the cash flow needs of the Brokerage he bought, and got deeper and deeper into debt, until we finally sold it for him.

According to our Critic, there are some incredibly good Route Sales businesses out there.  According to our own experience, there are many that would be a mistake to own.

There are some great Restaurants in the market.  And there are many that should never have been open, to begin with.

There are some superior Liquor Stores, in operation.  There are others that cannot cover their own Lease payments, much less provide for Debt Service and an Owner’s Salary.

And though fewer than in more prosperous times, there are businesses that are opened and flourish, or some that increase the volume and/or profits during the most trying economic times.  But the truth is that these are invariably successful more because of the skill and knowledge of the Owners, than from pure, dumb luck.

There is no question but that we are Business Brokers, and we do not make a dime, until you buy a business from us.  But we will always council caution over our own profit, for any Buyer with which we are working.

Mr. Critic, God bless you in your success.  But we still council such caution for Buyers looking at Route Sales – just as we do with ANY business they wish to purchase.

(Receive in-depth, personal consulting online, with The BAF Group’s principal at https://clarity.fm/donaldbarrick .

The BAF Group LLC is a full service Business Brokerage, with a history of more than a decade of service. Its Principal Broker possesses 25+ years of Business Sales and Divestiture. Although most of our work is involved in the Mid-Atlantic States, we have represented Sellers and Buyers throughout the Continental USA, and a number of overseas Buyers, as well. Some of our listings and additional information about us can be viewed at www.bafgroup.com. Thank you for your interest.)

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