When considering a small business for sale, there are certain things you should look at to know if the opportunity is right for you. You can look at the right things or the wrong things. Looking at the right things will increase your chances of success. Looking at the wrong things can put you in the same position that 95% of other small business owners face by having to close their doors.
The purpose of this article is to identify four factors but you really should consider when evaluating a small business for sale. These four factors are designed to give you a solid outlook when evaluating a business. If you should choose wisely and actually take the advice of these four factors, you will be head and shoulders above everyone else.
1. Industry – The industry is the first thing you want to evaluate with a small business for sale. You want to find out if the industry is growing or declining. Right now the online digital marketing industry is hot and a lot of businesses are building their platforms based on the Internet. On the flip side, the real estate industry has been hit hard by the economy and overall is declining. As a potential new business owner, this is the kind of stuff you need to know to make educated decisions.
2. Business Structure – The very next thing you want to evaluate with a small business for sale is the structure of the business. You generally have two choices… You have a franchise model which happens to be the most successful structure in the world or you have the traditional business model. The most successful franchise in the history of the world is McDonald’s, and it’s not because of their great tasting food. It’s because their system is proven to work anywhere in the world.
On the other hand, you have the traditional business model which is usually much more profitable but it has the highest probability of failure. Common reasons for failure include lack of capital, lack of planning, lack of experience, implementation problems, and so much more. All of these factors can derail a business fast. However, you must understand that these types of businesses can grow exponentially like Facebook or Google.
3. Differentiator – The third factor of evaluating a small business for sale are to understand the unique differentiators that the business has over its competition. Listen, anybody can make a pizza, so what’s going to make your pizza stand out from everybody else. The product or service of the small business must be unique and must solve a problem better than the competitors. In this particular case, a franchise makes sense since they can solve problems at economies of scale. Why this is important is because franchise corporations usually have a lot more assets and a lot more capital to stay ahead of the competition.
4. Branding – The last thing I want to talk about when evaluating a small business for sale is the branding. A strong and powerful brand will go a long way towards the success of your business especially if you’re opening up a new location. If you have a brand-new business that nobody is ever heard of before, you have a more difficult time getting the ball rolling. So if you have a name brand like Subway or McDonald’s, your to be off to a great start.