The economy is still on the rebound from its lows of 2008 and 2009, offering opportunities for those with an entrepreneurial spirit to consider looking for business opportunities. There are plenty of business opportunities available, and with improvements in the economy, coupled with an aging population of Baby Boomers who are looking to sell their businesses, you may want to begin the process of locating a prospective business for yourself.
If this is something that is of interest to you, there are at least 5 things you need to be mindful of before signing on the dotted line.
1. Do You Like the Business?
One of the first questions that you need to ask yourself is whether the business opportunity aligns with your core values. If you are a person who abstains from alcohol, for example, a liquor store may not be a good choice. The same holds true for the purchase of a gun store by a person who is anti-gun, or a convenience store that makes its largest profits on tobacco products, when you abhor them.
2. What Is the Market for the Business's Offerings?
It is important to understand the marketplace for the products or services being offered by the business opportunity. It would not be advisable to invest in a fast food restaurant with a little-known reputation that is doing business next door or across the street from well established brand names. This would be especially true if all of the restaurants served the same type of food. This type of over saturation would be the death knell for your business and result in a wasted investment opportunity. The lesson here is to keep an eye on the competition and to cherry pick the opportunities which stand to earn the most.
3. Can the Business Make a Profit?
Along with understanding the current market for your business, you need to understand its profitability. A look at the books and records of the business should give you some insight as to the revenue story of the business opportunity as well as some indication of its future profitability. You should make note of the typical expenses of the business and whether certain variable costs (i.e. fuel, utility, transportation, etc.) have an impact on your business's future profits. And keep in mind those hidden business expenses that often get overlooked.
For example, if you are considering the purchase of a distribution company and the outlook for oil prices is not good, this will have an effect on the rates you charge and your cost of doing business.
4. Is the Business Sustainable?
Profit growth and market opportunity are important considerations when deciding to purchase a business. You also need to ask yourself whether the goods and services sold by the business are sustainable for the long-term. You also need to know whether the type of business you are considering is adaptable to change as technology or consumer demand changes. The purchase of a pager store, while potentially profitable in the 1980s, would not be as sound an investment in 2014 if the business were not adaptable to selling new technologies like smartphones and tablet computers.
5. What Is the Potential for Growth?
Ultimately, going into business for yourself means you can be your own boss. It may also mean that you are looking for a way to increase your income and become successful as an entrepreneur. Whatever your reasons are for going into business, if the business's potential for growth is not there, you may need to decide to consider some other opportunity.
Keeping these five things in mind when making choices about perspective businesses will help you select the right opportunities that will be successful in the long run.