Buying or Starting a Business? Why Read This Blog?
First, thank you for giving us a try!
This blog is intended to be a series of published posts, and is being started for several reasons. Our biggest motivation is that we have become extremely and increasingly alarmed at the number of people who walk around with their heads in the clouds, spending tons of their hard-earned money in an effort to buy or start up a business, without really knowing what they were spending their money on. And failing! Some – not all of this wasted money – but some of it is because they are simply given wrong information by people that have their own agendas, and it is in their best interest to misrepresent opportunities, thereby giving business buyers and startup people incorrect information, from the beginning.
Who would have the motivation to spread misinformation? Everybody that can make a buck from your deal! This includes Business Owners/Sellers, Business Brokers, Franchise Companies, Loan Brokers, and even Accountants and Attorneys. Yes, even Accountants and Attorneys!
(As Business Brokers, we know of several Accountants that have purposefully screwed up deals. One Accountant told one of our Sellers – his own Client – that we were under-pricing the business by 75%. The Client trusted the Accountant more than us, because he had been the Company’s Accountant for more than ten years, and had known us for less than two weeks. It was demanded that we increase the price. We argued until we were blue in the face, but finally did so, and the business stayed unsold for more than a year, so overpriced that no one would even make a reasonable offer. The motivation for the Accountant was twofold: First, he realized that if the business sold, he would, in all probability lose a client. Second, if he were going to lose a client anyway, he felt that he should sell the business himself, and resented the fees potentially being paid to us, if we were successful. Once re-priced, the business was sold, successfully.)
(As for Attorneys, there was one in particular that we dealt with on a fair number of transactions. We noted that he would counsel his Buyer/Clients to refuse two deals, before he would allow them to finally purchase a third. He would spend hours in “researching” each business, delving into areas on which he was not equipped to render opinions, before deciding the Buyer/Client should not buy. Then, always on the third acquisition candidtate, he allowed them to purchase businesses that were, by any measure, lesser opportunities. Why? The only thing we could figure is that he got paid an hourly rate for his fees, and by disallowing the first two opportunities, regardless of how good they appeared to be, he was dragging out the process and inflating his billing hours. Moreover, in a dozen years as a Business Broker, we have had only two Buyers lose their deposits. BOTH were as a result of negligence on the part of their Attorneys.)
The moral is that you are the only person that you can trust. And you cannot trust yourself unless you are a knowledgeable Buyer. Starting up or buying a business in any other way, is like sending a soldier off to battle with a shiny new rifle, but no ammunition.
And just to set the record straight, we are not the kind of Brokers that use that old cliché, that all Attorneys are deal breakers. Our relationships with Attorneys are terrific, and we actually get a large number of referrals from Lawyers. The same with Accountants. We ALWAYS encourage both Buyers and Sellers to seek out advice from their Attorneys and Accountants the the strongest, possible way, even to the point of suggesting candidates for such posts, if necessary. Normally, in such extremely rare instances where an Attorney or an Accountant kills one of our deals, it is for very good reasons. But as in with any profession, there are always a couple of bad apples. (Believe it or not, there are actually some bad Business Brokers out there, as well!) Your protection is your own knowledge. You need to know what questions to ask, and when the answers are given, you have to have enough knowledge to determine whether that information is reasonable.
By becoming proficient at the research, you can reduce your chances of failure. But if you do fail, you will also have the tools to get up, brush yourself off and get back into the game.
Failure is not to be taken lightly. But it is not a sin; it is not something to be ashamed of; it does not make you less of a person. Some of the most famous and wealthy business people have actually experienced mammoth failures and even bankruptcies, before becoming successful. Failure because you took the risk too lightly and made a decision without doing the proper research is a bit insane.
This is not a blog about telling you or encouraging you to buy or start a business. It is about working hard enough at investigating your dream to determine whether it is worth having, and worth the risk. It is about establishing realistic goals, based on realistic expectations. Some of what you will read over the next weeks is fairly technical; much more can be classified as organized, common sense.
A huge number of people who want to be in business have no real idea what they are in for. Many years ago, I personally did speaking engagements in tandem with Nurse/Author Marlene Kramer, who wrote a book called, “Reality Shock: Why Nurses Leave Nursing”. Reality Shock, according to Ms. Kramer, described the bombshell that Nurses receive when they realize how different the daily activities they encounter in the profession are from what they expected or were led to believe, while in nursing school. And it causes Nurses to bail out of their profession in alarming numbers. I never forgot her lectures, and the concept is incredibly fitting, here.
As Brokers, there have been any number of instances where a Business Owner called us to sell his/her business, after only owning it for a year or so. One woman, we vividly recall – and we are not picking on women; she happens to be one that we remember, almost word-for-word – said she had given up her job and bought a business so that she could have more time with her children. She imagined that by owning a business, she could create her own schedule.
That is a great concept. Except that you have to go into it knowing that when you have a staff to rely on, the ones that call in sick, the ones that quit without notice, the ones that are most difficult to replace are invariably going to be the evening, night and weekend workers. And who will fill the void they left behind? In the vast number of instances, it is YOU! The Business Owner! That was her unfortunate realization, after she bought her business: She was not only assuming her own, planned responsibilities, but filling in for others, for any variety of absences.
“I want to be my own boss!” is a reason many people state, for wanting their own business. WRONG!!! Every Client, every potential Customer, any of the people you depend on to operate or supply your business is, one way or another, your boss.
We could argue about some of those people, but Customers are not something you can dispute, as to whether they are your “boss”. Don’t do what they want, don’t give them what they feel they are due and you will hear it from them, just the way you would from your old boss, Mr. Scrooge.
Many people feel that e-Commerce business insulates them from this experience, and that is one of the allures of people wanting that kind of opportunity. In fact, e-Commerce can be even more problematic in this area. The Internet means that when your Customer/Boss feels that you have screwed up, frequently you will see you and your business targets of complaints that are both vicious and impossible to fight. And e-Commerce Customers are more attuned to using the Net, so that kind of business is even more apt to be skewered, electronically. “Flamed”, is the appropriate term. People will make critical comments on the Net with such extraordinary exaggeration and savagery, that they would never, ever say in any other way.
Never thought of these things? This is all part of Reality Shock. (Thank you, Marlene Kramer. It has been close to thirty years since we last spoke and you would undoubtedly never remember me, but your lessons were well learned!) And it is absolutely crucial that you do everything you can to avoid that ugly kind of surprise, when you own your own business.
This blog does not suggest it is the only way to understand these issues. The opinions represented here are frequently our own, based on a dozen (and counting) years of Business Brokerage, (our Web Site is www.bafgroup.com,) and more than twenty years of startup and troubleshooting for a variety of companies, (from Mom and Pops, to Franchises to FORTUNE 500 subsidiaries,) before that. There will always be one Reader who will disagree, saying, “But I know a guy who…” Great! Understood! Go in peace!
However, realize that what is being expressed here is not the opinion of just one person; it is also from information gained from a huge number of transactional experiences, from discussions with other Buyers, Sellers, Brokers, Attorneys, Bankers, Accountants, Taxi Drivers…okay, maybe not Taxi Drivers, unless they have bought or sold their businesses. The Reader that knows ONE GUY that did it differently may be on to something new or novel; but he could also be dealing with one guy that succeeded by mistake; or one guy who fell into a fortunate series of situations through pure dumb luck, which cannot be replicated; or one guy who bragged and lied about it!
Many people who freely offer their advice on the Internet, we have found, actually have no tangible experience in the area in which they are offering such advice. They are specifically people who know a guy, who told them about a brother-in-law who knew a guy… Is that the kind of information you want to use as the basis for making the biggest investment in your life?
Some of the topics represented here will be painfully brief; some will be tediously long, all depending on the variables involved with the topics, themselves.
Some of you will want more detail about specific information. We welcome such questions; however, realize that not every question can be answered, or in the kind of detail that you might wish. We will make every effort to comply with questions, if you choose to post them.
Thanks, in advance, for being with us.