As business brokers, buyers and investors are always asking us, “What type of business should I buy?” The answer to that question truly depends on who you are, what your background is, where you want to live, and what you see yourself doing every day. Small business owners are consumed by their businesses, and if they aren’t at their business running it, they are thinking about it. So, the best type of business to buy will be different for everyone; however, I am going to share my thoughts as to what I would purchase, if I was looking for a small business to buy. This is purely my opinion, based on years of experience in this field. Here are the top 4 attributes I would look for in a business if I was buying one in today’s market.
This has been my number one answer to the question, “What type of business should I buy?” for years, and I stand by it even more today in a post-pandemic world. We saw the term “essential businesses” become a household name in 2020, and more than ever, recession-resistant businesses are in high-demand. What do I mean by “recession-resistant” businesses? Well, businesses whose supplies or services will still be in-demand, even in an economic downturn. That means companies such as HVAC, plumbing, pool maintenance, landscaping, pest control, electric, roofing, shipping and delivery, manufacturing, etc. Also, due to the absolute steady boom in in the housing market, any business in the construction industry is a great bet right now too. If you buy a business that is seasonal, based on tourism, or is something that could be deemed non-essential during times of economic crisis, then you are taking a much bigger risk, as those types of businesses won’t be as steady or reliable sources of sales or revenue, especially when times get tough.
If I was shopping for a business, another thing I would look for is simplicity. Is the business a simple concept, straightforward when it comes to carrying out a finished product or service? I see too many businesses out there that are complicated to operate, have too many different income streams or they have diversified themselves too much. I would want something that is easy to understand and operate. A singular focus, at least to start with, would be something that would be an asset to a new business owner to step into. Also, is the business simple enough to run, even by someone who might not have direct experience in the field or industry? I would like a business even more if the simplicity of what it does was an urgent need for customers and solved a problem for them that they would need as quickly as possible. That would also qualify the business as in-demand or “recession-proof” as mentioned above.
Potential for Improvement
Many buyers are looking for existing businesses to purchase that have great processes and procedures already in place, or they have a fantastic market-share already, or they have a team of highly trained employees eager to stay on with the company. While these are all awesome reasons to buy a business and pay top-dollar for a business, and in most cases, make these businesses highly saleable, I personally would be looking for a business that has some obvious room for improvement. I would be asking myself, “What can I bring to this business to make it even better?” For example, you’d be shocked to learn how many small businesses don’t even have websites or a web presence at all. Many of them are run by hopeful retirees who have built their businesses on word-of-mouth referrals, so there has been no need to invest in any digital marketing. So, I would look at that as an amazing opportunity to improve that particular aspect of the business. Imagine how much more business this company could do if customers were able to find it online? Or if we even did a small amount of digital advertising. Maybe the business has no documented processes and procedures. This might be my opportunity to really make the business more efficient, cut costs, train new employees faster etc. Looking for ways that I could personally make a big improvement in the business would make it a very intriguing purchase.
Many entrepreneurs will desire to grow the business that they purchase, while some business buyers just want to buy a little shop and keep it chugging along, making what it has historically made over the years. That’s ok for some people, but it wouldn’t work for me, because I like to create and build: any business I considered for purchase would need to be scalable. Does it have the potential to reach new customers in its current area? How expensive would it be to expand into new areas and replicate what it currently does with a whole new clientele? How easy would it be to hire and train the employees needed to service the expansion? If it’s a business that couldn’t really grow more in its current area or it would be difficult to expand or grow into new areas, I would feel that the business might be too limited for me to consider. But again, everyone is different and has varying goals and desires.
If you are shopping for a business to purchase and would like to get our help to make it happen, then please reach out to us. We welcome working with buyers, and remember, we can help buyers purchase most businesses for sale, and buyers don’t pay any commission to us. So, you would get our professional expertise for free…it doesn’t get better than that.