The saying goes, “if you want your dream job, create it”. At BizON we believe that “if you want your dream job, buy it.” But before jumping into what to look for when thinking of buying a business or franchise, let’s acknowledge why someone would even want to buy an existing one. Here are 3 reasons:

1. Less risk: There is less risk purchasing an existing business versus starting something from scratch. An existing business is established, has a market fit and money is already being generated.

2. Shorter Return on Investment: When you put money into the purchase of an existing business or franchise, you’re generating a return right away. You have access to a living, breathing and money making business that you have to nurture and grow versus experiencing the lag time of a startup.

3. Impact: You have existing relationships with clients, suppliers and stakeholders.

Now that we got that out of the way, let’s go over what you should look for when thinking of buying an existing business or franchise. We’ve been building BizON for the last 5 years and have had the privilege of connecting over $1billion worth of businesses and franchises. During that journey, we’ve uncovered 3 pillars of a selling business/franchise that make connections successful. Let me break it down:

Timing

Successful buyers did a great job identifying trends and deeply understanding which businesses to buy or not to buy based on timing. For example, I created a model called S.E.T. and it forces me to question things through the lenses of Social trends, Economic trends and Technology trends. Making decisions based off this model is advantageous and keeps you playing in the future, making great decisions. For example; if you’re looking to buy a taxi company, due to technology and social disruption, I would say to pass on that opportunity as the upside is very limited.

Self-Sufficient

You want to make sure you are purchasing a business or franchise that has strong operating principles, values and is self-sufficient - meaning that it is not dependent on 1 leader, 1 employee, 1 supplier or 1 customer. No buyer should want to enter a business with so many unknowns, and the fear of losing clients or a big supplier that can jeopardize operations. This concept sounds pretty easy and straightforward, however, many business owners disregard building a strong self-sufficient business. In my experience, less dependency in business operations equals a more valuable and sellable business. And as a leader of a business, if you’re not replaceable you are a liability to a succession plan.

Recurring Business

You want to find a business that has profitable, growing & recurring revenue year-over-year, and you want to see 3-5 years of financials in order to apply some sort of normalized projection. As a buyer, you need to understand that you are not buying the business for the present moment you are buying it for future opportunities. So question the financials to ensure they can be upheld and ensure the seller is clear on the future opportunities in the industry.

Here’s the fascinating thing when all 3 pillars intersect – you have just purchased a valuable & sellable business on track for healthy financial reward. Let me explain:

a) The business is seamless, meaning the business is self-sufficient with great timing. Therefore any business savvy person can walk in and operate the business with limited to no issues.

b) The business is sustainable, meaning the business is self-sufficient with healthy recurring revenue, therefore the traction to date can be upheld for the foreseeable future.

c) The business has growth and upside, meaning the business has healthy recurring revenue and timing is great, therefore you can capitalize on the growing revenue and unlimited market opportunities in order to continue growing the business in the right direction.

I hope that this information is helpful as buying a business can be one of the most challenging, yet rewarding experiences you will ever encounter - and I wish you all the best! For further guidance and advice please reach out to me and/or check out BizON: https://buyandsellabusiness.com/

Best of luck!

Nunzio Presta | Ex pro hockey player turned entrepreneur! He is also the Founder & CEO of BizON, an online marketplace where people can buy, sell and grow businesses or franchises every day.