At a certain stage as a CEO of a company in Switzerland, I had extra cash flow that I needed to allocate and the question came to mind. I’m looking for a business for sale by an owner nearby. Then I started thinking whether a business for sale by owner could actually result in a good outcome and become profitable as it sounds.
Let’s be honest here, no one would sell their business unless they need the money. If their business is profitable, then why wouldn’t you keep your company unless you need the funds at that stage? That’s what a buyer would look for. A buyer would look for a company or a business that is having potential from its owner but is not relying on the owner and that is for sale at that exact stage.
Timing is key when it comes to this matter.
Things to Look Out for in a Business for Sale by Owner
When I thought of purchasing a business, the first thing that I looked at is the owner’s dependency and this is where more than 50% of businesses for sale fail. You see, you could easily buy a business like a print-on-demand shop or an e-commerce website and the numbers look very good but a few months later you would determine that it’s actually not a good idea and that you’re losing money.
The reason for that is this business relied more than you think on the previous owner. The first question you have to ask yourself before deciding to buy a new business is does it depend on the owner or does it not depend on the owner? Can a manager replace an owner in this sense?
If the answer is yes, you need to put it into testing. The best way to do that is to actually either find a company or a business for sale that already has a manager in place and that the owner’s time spent is extremely low or to agree with the owner of the sale that you would do a trial of funding this manager and seeing whether this is going to work out or not before the sale.
Marketplace for Business Sales
There are a few websites online that could help you buy a new business by owners or old businesses that are generating money by other owners. A most famous and what I really recommend is Flippa. I personally hosted my agency for sale there and found a lot of attention in this matter and also almost purchased a few businesses that were hosted there.
Flippa.com has a very huge number of businesses. But remember these businesses are mostly online businesses and that’s what people are looking for. They’re looking for businesses that are easily managed and easily run and that are easily replacing a CEO. And this is where Flippa’s key selling point is and this is why I recommend using Flippa or when I recommend using Flippa.
Evaluating a Business for Sale by Owner
So as we mentioned you could find online a business for sale by an owner. Then you could actually purchase it and the process could be as smoothly as possible. But there will come a problem of maintenance and understanding this company and that’s what most new owners have a problem with.
A company is run in a certain way. In order for you to implement your thoughts on this company the result might not be that good. It might be very good. You might be making more sales but it also might not.
So my recommendation to you is to buy a business that you have an expert experience in. Let’s talk about an example. If you are a marketing consultant at a certain company and you’re thinking of buying a new business on a site the best thing you would purchase would be something that is like a marketing tool like something that would help with keyword research or marketing plan. Then you would add to it your personal experience that a matter in a very fast and easy way making it a good purchase and enhancing the outcome of this platform.
Pricing and Valuation of Businesses for Sale by Owner
Of course you need to expect such businesses that are actually running with high technology to be not so cheap. I was going to sell my business consultancy agency that was making around $60,000 per year for around $100,000 online. Then I chose not to do that because it was very undervalued. I knew that I could actually implement a few tips and tricks here and there, enhance a few strategies and sell it for a lot more in the future.
Mostly, what I was working on is removing my dependency from it. I would need to have this agency to be run in a way that doesn’t require my presence. That’s exactly what you need to think about when purchasing a business.
Budget Takeaway
Always put a budget of $100,000 to $500,000 if you want something that actually works. That’s because some people online would just design a template of a website, put some tools and plugins here and there and tell you, there you go. This is the print on demand website that you can purchase. All you need to do is to actually sell and that is the biggest problem of any business is selling.
Others would inflate their numbers and you really have to take care when you look at those numbers. Others would just put in a marketing budget that is tremendous in order to sell for a few months. Then once they stop marketing such a product, then their businesses are just non-existent.
These companies you have to really watch out for by doing very, very proper vetting. No online website could do this vetting for you. You’re going to have to do it yourself. You have to double check all the numbers. You have to have some sort of business leadership experience in order to make sure that you’re buying something that would result in a better ROI or that you would sell it in the future for a bigger price.