Many new entrepreneurs head into small business deals without thinking it through completely, only to have the business suffer before the year is out. Whether it is an existing business owner looking for additional businesses to expand with, or an investor looking for something new to do, before settling the deal with the business broker he or she should be aware of the 7 things that can kill a business even before it takes off.
1. Misplaced Passion
While it is important to love what you do in order for it to be successful, when it comes to business, it is far more important to look at the reality. If a potential and interesting small business is not likely to succeed in terms of cold hard figures, then it may not be worth investing in.
Many first-time entrepreneurs do not think long-term or simply avoid the long-term picture. At the time they purchase a business, they may not think about the future and whether they see themselves working on it six months or six years down the line. Short-term commitments don’t make for good business. Therefore it is important for entrepreneurs to be honest with themselves and put their money on businesses they are truly invested in.
3. Ignorance of the Business World
It is important to have some knowledge of the business industry before purchasing a business. The hard facts of running a business can hit an ignorant novice in the business world quite hard, and they soon realize that you cannot run a business on passion alone.
4. Focus on Profit Alone
While the net profit a business makes is an important factor in helping to make a business purchase decision, a narrow focus on profit alone is bound to lead to failure. The business must be views as a whole, such as how it is suitable for the lifestyle that the entrepreneur leads and whether it is viable in the long term. Along with viability, passion and some business sense is also needed for the success of an enterprise.
5. Hasty decisions
It’s difficult to find a good business. And yet many first-time investors simply enter into the first attractive deal that they find and suffer for it eventually. Good research is essential in order to find a lucrative business. The way to do this is to conduct surveys, ask questions, talk to the local council and speak to related and nearby businesses. It can also help to have a circumspect accountant and a reliable lawyer on the team.
Some people start a business as a way to cater to their egos and a social status boost. Of course such a business is bound to fail if there is no passion or eye for profit involved.
7. Misplaced Trust
While buying a business is always a gamble, it’s always better to be circumspect about what the broker and others tell you about the business. For instance, a broker who has nothing but praises for a vendor or attempts to cover up lack of accounts etc. may only be trying to sell you the business without consideration of the business health.
Keeping these caveats in mind before a deal is finalized is bound to lead to a more robust and healthy business startup.
Domenic is a passionate business blogger and works as a business broker.