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The Keys to Starting or Buying a Business

June 10, 2013

We frequently get calls and email, saying that the person contacting us has $50k, $75k, $150k or more available, and asking what he/she should buy or start, in the way of a business. They want to know what is the safest, best way to invest their money, in order to get a good return on that investment.

Frankly, the key is not the amount of money or the type of business. It is YOU!!!

The real critical points are: What do you know? And how well can you manage and grow that business?

This may mean understanding the technical side of a particular business. (If you are Software Engineer, do you know anything about Auto Repair?) It may mean knowing how to manage a large number of Employees. (The biggest reason people want to sell their businesses – other than perhaps retirement – is because of how tired they are in managing a staff!) It also many mean being able to understand how to deal with Inventory Control and Cash. (We know of one Restaurateur that owned several locations, and whenever he was not in one particular Restaurant, Revenue dropped 20%; miraculously, when he visited that store again, the Revenue increased 20%!) And it may also mean knowing how to promote and grow the business. (Many business people believe that, if you are not growing the business, you are losing ground; staying where you are is actually suffering losses, for one thing, because your competition will always be after your back.)

A lot of people believe that Liquor Stores are generally, great businesses. But if you do not know Inventory Control, if you cannot determine how to buy in bulk at the right time, you can lose considerable money in getting the volume discounts that allow stores to compete with their larger neighbors. And if you are in a Wine market, not knowing the kinds of Wine, when to drink them, what foods should be paired with them…you will find your clientele will simply erode to other stores where the owners are more educated.

Keeping with the Liquor Store example, Beer is a losing proposition, in many stores. National brands like Budweiser and Coors have the worst Profit Margins. Newer, “craft brews” have great Margins, but you need to know what to look for and when to order them.

With a lot of Liquor Stores, it is not a matter of the Customer shoving a bottle and a credit card at you, and walking away. The same can be said for all other businesses. Laundromats? Pricing and mechanical knowledge is key. Buying an ongoing location can be a nightmare, because of financing. Starting one up can be extremely expensive. Convenience Stores? Competition can kill you, unless you have the perfect location. Theft, Inventory Control and Employee difficulties are huge, in that industry. Each business can offer tremendous opportunity for financial reward; but you need to study and understand the limitations and dangers as well, in order to overcome those difficulties and protect yourself from disaster.

We have written another post, detailing this subject from a different perspective. You can find it at: https://combrokerbusiness.wordpress.com/2012/01/06/what-kind-of-business-should-i-buy-or-start/

We would urge you to take this to heart. It does not matter how much you have to invest, the issues are the same.

(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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