There's a twofold answer to the question 'What Business to Buy' simply because in its' core it involves two aspects: You and The Business.
At first it is all about Your Skills, Knowledge, Experience and Interests. When looking for Opportunities in Business You are a fundamental part of the Process. Make list to narrow down personal interests, traits and characteristics and look for a Business that suits these exercises. Most of the time when entrepreneurs buy businesses that do not match their Temperament, they end up unsuccessful, unhappy and selling the Business.
Ask yourself the following questions to get Your Ideas for Businesses:
- What are my 5 Strongest Personality Traits? You can also opt to ask your friends and family to send you lists with their observations (can be very revealing).
- What are my 5 Strongest Skills when it comes to doing my current or previous jobs?
- What Role do I want to Play in the Business?
- What Destination and Location do I want my Business to Have or can it be a Business without a fixed Location (such as internet based).
- Do I prefer a large-scale business with many contacts and customers or do I prefer to focus on a niche market, dealing with a smaller number of contacts and clients?
- Do I want a Product Supply Type of Business or a Service oriented business?
- What is my Business Investment Budget?
When going over all the answers to these questions, you will have a Clear Picture What Type of Business you want to Buy.
Find a Business to Buy
After having identified What Type of Business you want to Buy it is time to Find a Business to Buy. You will want to opt for a Business that offers Value for Money. Its Valuations have to be backed up by Reliable and Detailed Financial Data.
Some Investors are Buying Businesses because they are Cheap compared to their core Value. They believe that as long as the market undervalues the business relative to the core value, they are making a Solid Investment. This way of Investing fully depends on the reasoning that the market will eventually realize it has undervalued the Business and will correct its Course.
Below some questions you can ask yourself when determining What Business to Buy:
- Does the Business Match my Personal Characteristics and Expectations?
- Is there a Solid Business Plan available?
- What are the Top-5 Competitors of the Business?
- Do I have access to all Detailed Financial Data?
- What is the Trend in Profits over the last 5 years?
- Does the business show healthy and consistent cost margins?
- What is the expected Return on Investment?
How much you will always profit from your Business depends on the level of Original Investment and Your Management and Marketing Skills.