If you’re interested in buying a small business without paying a fortune for the privilege, here’s a piece of advice that you will certainly find useful.
Pay attention to entrepreneurs in their early stages that are working on ideas that have strong potential.
Buying a small business that’s successful not only pits you against other eager brokers and buyers thus raising prices but may also have had its’ best days already.
There are so many entrepreneurs out there working on different concepts that are way past testing phase but on the runaway and about to gain momentum. Tracking them down can be hard given that their lack of fame puts them out of the spotlight (media, buzz and so on) but if you’re well immersed in an industry you’re interested in buying a small business from will be less challenging than it would be for a complete outsider.
I have a client who was interested in buying a small business to keep him busy in his retirement years. He was looking for options and I asked him what type of venture he ever dreamed of owning. A bed & breakfast was the answer.
My instructions to him were to go out there and find bed & breakfasts that piqued his curiosity and casually speak to the owners then get back to me to conduct some due diligence from a strategic viewpoint. He was amazed that I was more interested in the ones that did not perform well at all.
That’s because as a marketer, I know that the number one problem for bed & breakfast is attracting guests all year long. If I could only find concepts that would turn the poorly performing bed & breakfast into a winner, we’d be sitting on a good opportunity.
One day, my client told me about this great bed and breakfast that was beautiful but performed badly because it was in the middle of nowhere according to the owner and the banks who were refusing to bail her out from her challenging days.
The lights turned on in my head and I strongly advised my client to make an offer right away. The original bed and breakfast owner was sitting on a goldmine and she did not even see it! Do you know how many people would kill to be in the middle of nowhere of a couple of days to think, get away or simply be refreshed?
Being remotely based was a key concept that my client would have to focus on as the new owner. And business would boom, I can guarantee you! What the current owner saw as a weakness was actually a strength that needed to be exploited.
(I visited Australia in late 2007 and my hosts took me to a place in the middle of nowhere. At first I was wondering what I was going to do for three days doing absolutely nothing.
As a busy entrepreneur, that was one of the most memorable time ever and I wish for more getaways with no phone, Internet and noisy neighbours! Point to this story? “Middle of nowhere” is a strong unique selling proposition to a select audience)
Buying a small business that has potential is probably the cheapest and smartest thing observant entrepreneurs can do. I once read that McDonald’s was sold for dirt-cheap to an entrepreneur who saw the strong potential of the simple concept and just ran with it making it the global company that it is today!