When you decide to become your own boss through buying an existing business or franchise you accomplish three very important things:
a. Job security. You have a job for life.
b. You have the opportunity to make more money.
c. You are building equity into something you can sell later if wish.
When I started my own company Business Consultants International, Inc. back in 2002, I did so with the intention of buying a consulting franchise. While I was unsuccessful in obtaining the franchise, I was very successful at educating myself about the process of buying companies. Buying a business is one thing, owning a business is even more and operating one has it’s own set of challenges that you had better be willing, ready and able to deal with. Therefore, in my opinion it is far wiser and more profitable to buy an established business, one that has already passed the start-up phase. A business that has at least three to five years of history, financials, customers, and vendors, has a track record of success.
A business that is already earning enough revenue to pay for its costs of operation, its debt service and pay for your lifestyle (aka, “Income”, or “cash flow”) is the one you want. Similar to buying commercial real estate, you only buy it for one reason… CASH FLOW! The same goes for buying a business. You are only buying the company because of the net cash flow it generates. It’ the cash flow that pays your bills and supports your lifestyle. But like anything there is a process to buying a business. This is where education or the lack there of can become very costly. It’s better to hire a mentor (consultant) and learn what to avoid, than make mistakes from not knowing and pay a lot more. Statistics tell us that close to 90% of all businesses fail within the first 3 years and 50% of the remaining 5 percent drop off in 5 years.
( Part 2 of 3 )
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