Posts Tagged ‘Family Member’

For many, the American dream of owning a business is in queue right behind owning a home. I was a teenager when I owned my first business. Since then I have bought or started many businesses and helped others do the same. Here are some common mistakes I have witnessed or committed myself.

Paying too much

This results from the combination of all other mistakes. Many new business owners set themselves up for failure by paying too much, which results in higher loan payments, lower operating funds, and reduced borrowing capacity.

Letting your emotions rule

If you have always dreamed of owning a business, it is very easy to get caught up in the strong emotions invoked by seeing those dreams coming true. To counteract your emotions, take your time, do your homework, and enlist the help of objective advisors.

Paying for potential

You should only pay for the business as it stands at the date of purchase, not what it could be in the future. You will have to spend time, effort, and money to develop its potential. The seller chose not to invest these things, so he does not deserve to be paid for them.

Not evaluating yourself

Do you have what it takes to run this business? Try to match your strengths to the important duties you will be required to perform. Running a small business requires the owner to do many things. No one can be good at them all, so make provisions for those areas in which you are the weakest. Some tasks like payroll and bookkeeping can easily be contracted to outside vendors. Possibly your spouse, other family member, or a partner could do things that you cannot or do not want to do.

Not building a team of experts

At a bare minimum, you should enlist the aid of an attorney and a CPA. The attorney can prepare and review documents, help structure the deal, and make you aware of legal and liability issues. The CPA can provide a financial analysis of the business, and advise you about tax and accounting matters. You should consider adding a business valuation professional. His valuation report can be used to determine the reasonableness of the asking price, negotiate a lower price, and provide valuable information about the business, the industry, the competition, and the economic conditions.

Relying on bad information

You should verify all important information about the business. Your CPA can check financial information like receivables, payables, and inventory. Your attorney can review loan documents, leases, and contracts. Your business valuation professional can analyze the competition, the industry, and the economic conditions. Use independent appraisers to value real estate and equipment. Get a credit report on the business through your CPA or banker. You can do some of the investigating yourself to save money, but do not cut too many corners it may cost you in the long run.

Changing too much, too fast

Once you own the business, you will be tempted to start making wholesale changes from day one. You risk alienating long-time employees and customers. Unless the business is in bad financial condition and needs immediate action, its better to take some time to get to know the business, your employees, and your customers before making changes. This is a perfect time to solicit suggestions from employees and customers.

Buying a business because you like to do what the business does

One reason restaurants have a high failure rate is people buy or start them because they like to cook. Very few restaurant owners spend time cooking. Their time is spent managing staff, ordering supplies, doing paperwork, and handling daily crises. A small business owner must wear many hats including that of manager.

Not being interested in the businesss product or service

I made the mistake of thinking that because I am a CPA and smart that I could own and operate any business. I bought a business that sold high-performance auto parts to young men who drove jacked-up, four-wheel drive pickup trucks and went to the drag races every weekend. I did not do either and never understood why anyone would. I could not relate to my customers and went out of business in about a year.

Conclusion

Buying a business is a complicated, emotional process. By avoiding these costly mistakes, you can prevent turning your dream into a nightmare.

You’ve decided that you want to give up that 9 to 5 and be your own boss. You’ve decided on your niche and done some research into it. What do you need to do next? Source a product to bring in some money.

There are many websites out there that are legitimate, enabling you to build a substantial business and earn money working from home on the Internet. You could be answering questionnaires for 20 each, reading transcripts of books prior to being published, writing articles. However, there are others, generically called get rich quick schemes. These schemes encourage you to spend money that you haven’t got with false promises on the returns on your investment. The people who run these schemes (scammers) prey on the nave or vulnerable and reel them in. Once, you are under their spell there is no letting go. Some, even ask you to pay money upfront stating that they’ll double even quadruple it for you!

The auction sites are the worst sites for these people to hide in and wait for their prey. You’ve probably all visited one at some time, searching for that special gift for a family member, friend or even yourself. The scammers advertise their merchandise, usually something that is a much sought after product. You see it and snap it up, pay, they get your money and you don’t get the goods. This happens time and time again.

Help is available though. The Better Business Bureau (bbb.org) and Federal Trade Commission (ftc.gov) are two organizations that are there to help you keep away from these fraudulent scams and check out the legitimate ones on the Internet to prevent you from losing you’re hard earned cash. They are encouraging people to complain to them about these scams. If you get caught up in one, no matter how much money is involved, you MUST report it and stop it from happening to some other unsuspecting person trying to look for an honest way to make a living online.

You owe it to yourself to check out the Companies or people that are advertising a scheme or goods. Do they have testimonials and are they real? Follow them up by contacting the people who have made the testimonials. Visit their sites and check them out through the Better Business Bureau and Federal Trade Commission.

Forums are a good place to get some help. They are full of valuable advice. You can read up on the benefits and pitfalls of schemes or ventures you are intending to embark on or perhaps you’d like to ask some specific questions. All of the members have had to start from somewhere and they will give you good, honest advice.

Ensure that you are aware of what is happening and beware of that email dropping into your inbox stating that you can get rich quick. There is no easy way to make money on the Internet, it takes a lot of time, effort, determination and hard work.

Remember:- If it looks to good to be true, it probably is.