The Risks Of Buying A Business In Raleigh, NC
We recently wrote an article for people looking for businesses for sale in the Raleigh, NC area. There were topics in that article that deserve a deeper dive that we will consider today, first being the advantages of buying a business or business ownership.
Imagine for a moment that you are on the fence about buying a business in Raleigh, NC. You like the Raleigh area and you and your spouse feel that the Raleigh area would make a great place to raise your family. As you consider your employment options, the idea of sending resumes, applying and interviewing for countless jobs isn’t that appealing.
You have plenty of education and experience to your resume and application would be strong but the idea of independence, entrepreneurship and leaving the corporate rat race stirs in your heart and soul.
What if you owned your own business? What if you were your own boss? More and more Americans are asking themselves this question and business ownership is making this dream come true.
Baby Boomers (1946-1964) began retiring in 2012. This generation privately owns 60% of the 15,000,000 privately owned businesses in the US. 9 million private businesses are owned by someone soon to be retiring. These businesses are rock solid for three reasons:
1. They Have Been Tested- Businesses that have been owned by Boomers have been tested over the decades and they are still going strong. Think about the life cycle of a business from birth to sustainability. The first owner had an idea and went to work making that idea or dream come true.
Owning a business isn’t easy and all the economic cycles, employment issues, tax demands and much more couldn’t close the doors on these Boomer businesses.
2. Generational Production- For a lifetime these businesses produced income for a family to eat, live in a home, go on vacations, recreate and earn enough to enjoy their retirement years.
After five years, ten years, seventeen years, twenty-four years or thirty-five years these businesses have continued to produce. Year after year, decade after decade these rock-solid businesses have been the goose that laid the golden eggs for their owners.
3. Goodwill- When a business has operated in an area for some time it builds goodwill. Goodwill brings with it a reputation, loyal customers, suppliers, trained employees, systems and immediate income. In many of these businesses, there are generational customers. Their grandmother/grandfather shopped there, their mother/father bought products there and now this is where they shop, buy and do business.
These small, privately owned businesses are the backbone of the American economy. This is why you see so many internationals move to the US and the first thing they do is get a loan and buy one of these businesses.
The Risks Of Buying A Business In Raleigh, NC
Many people believe that being an employee of a larger firm is the safest bet. Unfortunately, many found out in 2018 that during a downturn in the economy that their positions were expendable. Today, companies are hiring younger, cheaper and many middle-aged Americans are simply off the market.
Have you ever had a bad supervisor or worked in a toxic environment where going to work was more of a drudge than a blessing? The point is there are risks with any employment options that you make.
For those not wanting to endure the corporate America employment risks, business ownership is the new normal. Are their risks with owning a business? Absolutely but one may find that the risks are actually lower than they imagined.
1. Learning Curve- A new job and business ownership both share the issue of the learning curve. New work culture, new relationships, new systems, and new personal rhythms are all part of and new work endeavor.
This risk is actually lower for the business owner. If there is a faulty or costly systems error within a business that you own you can quickly remedy the issue.
2. Relationships- You may have heard the saying before, The good news is, you are working with people. The bad news is, you are working with people.
If a relational issue arises at work with a boss or an associate they are probably very little that you can do about it. If a relational issue arises with an employee that you own you can train, review or terminate the position.
3. Money- With a business that you purchase you have to put up your own money to buy the business. This is a risk but is it really a true risk? Most people that buy a business make more money than if they are simply employees and the business they purchase typically pays the loan off on average in less than five years.
If you are a hard-working, honest employee and the business grows by 50% you typically do not receive a 50% pay raise. You may get a 3-4% cost of living raise but most often the company execs or owners disperse a large portion of new earnings to themselves.
If you are a business owner you can give yourself a raise, you can bless your employees, hire new staff, pay off debt or expand your business.
Know Your Options
Owning a business is not for the faint of heart. There are stresses and risks that are real and unique. As covered already there are risks associated with whichever path one might choose.
If you want to buy a business there are a few things to know. If you have never bought a business, make sure you read our free eBook.
1. Respect- Selling a business is a very matter for a business owner. The business owner doesn’t want their customers, suppliers, competitors or their employees to know. Working with their business broker ensures this consideration is granted for both parties.
2. Self-Awareness- Knowing your strengths and weaknesses is a great place to start. It’s tough to jump from a summer intern to the owner of a multimillion-dollar business. Ask your friends, family or spouse about their assessment of your unique gifts and weaknesses.
3. Financial Awareness- Do you have the resources and credit to purchase or get a loan for a $500,000.00 business or a $20,000,000.00 business? Knowing your financial strengths and weaknesses will help narrow your search and save you time.
4. SDE- The Seller’s Discretionary Earnings is what the seller is taking out of the business after paying his suppliers, his employees, his rent, his overhead expenses, and his taxes.
Your personal salary is going to be very close to this amount so pay close attention to this number.
5. Demographics- If you are buying a business in an area that you’ve lived in for decades then you have a decided advantage. If you are new to an area or moving to an area then you will rely more on your business broker for more information.
Communities and cities are always changing. Your understanding of the surrounding area of potential business is always helpful during this process. Make sure you are working with an honest and knowledgeable business broker.
Where Do I Start?
Your first step is to look at the listings available in your area. If you have ever purchased a business you will want to build a relationship with a trusted business broker that will help navigate you through the jungle and chaos to find the healthiest and best business suited for you.
Never go it alone, contact us today to walk with you step by step as your trusted business brokers.