Why are people so fascinated with being an entrepreneur or starting a business? According to an article by Erin Griffith, 9 out 10 startups fail, meaning you have a 10% chance of succeeding.
Most of the time, the failures are due to creating a product or service that nobody wants; servicing a market that provides little to no opportunity to scale and grow a business that can make a difference; and lastly, in my opinion, people thinking that being an entrepreneur is the easy route, until they uncover that it takes a lot of hard work.
Granted, real entrepreneurs can fail too, and there is nothing wrong with failure. Failure is a source of learning and a stepping-stone to success; however, I am here to speak about the options you have to mitigate risk.
Do I have to start my business from scratch?
Even with the high failure rate, more and more people are turning to entrepreneurship in order to take control of their lives and to be part of something that suits their lifestyle and increases personal fulfillment – all of which I think are great goals. But, what if there was a way to do that without having to go through the grueling experience of building a startup that could very well fail?
One of your options to avoid starting from scratch is to explore entrepreneurship through acquisition. The fact is, being an entrepreneur is not only about starting a business from scratch but it can also be about growing an existing business into something better.
Now, I’m not going to sugar coat it – buying an existing business or franchise can be one of the most challenging experiences in your professional life. You need to prepare yourself both emotionally and financially for your purchase and the preparation must happen long before finding that perfect opportunity.
A few of the things you need to think about are: why you would want to buy an existing business or franchise; what your purpose for the purchase is; and whether entrepreneurship through acquisition is a good idea for you. And, do you have a long-term vision for the growth and exit of the business?
What should I think about before making a decision?
After seeing many of our users buy and sell businesses and franchises from across Canada, the USA, and Australia, we think that there are two important topics to consider when you are thinking about entrepreneurship through acquisition:
- What are the benefits of buying an existing business or franchise?
- You’ll likely have an existing customer base ready to hand over money.
- Short return on investment timeline since the business is established and should have recurring revenue.
- Processes are in place in order to provide a turnkey operation.
- Proven and tested market – that’s why the business is still in business.
- Reputation – the business may have high customer satisfaction from which you can benefit.
- If I decide to buy a business or franchise, what should I look for?
- A business with a high EBITDA (earnings before Income Tax, Depreciation, and Amortization) margin. This is usually found on the financial statement in the income statement. Aim to have above 25% EBITDA margin.
- A business with recurring customers. When you have monthly recurring business it is easy for a potential buyer to validate financial projections.
- Buy a self-sufficient business that is not dependent on one key leader, one employee, one supplier, one vendor or one customer.
- A business that showcases that the revenue growth comes from the right place.
- A business that has steady sales (not cyclical).
Am I ready to take the next steps?
Maybe you are meant to find that perfect existing business or franchise to make your own through things like renovations, innovations, operations, marketing, branding, and overall strategy to scale and grow the business.
I’ve seen tremendous success stories that inspire me as I’ve witnessed my users fueled with passion and purpose to build a business or franchise that suits their lifestyle. Don’t let the romance of starting a business from scratch mislead you. Your goal is to do something you love and there is a chance that someone has already started and done the grout work for you!
Ex-pro athlete turned entrepreneur. Founder & CEO at BizON, an online marketplace where people can buy, sell, and grow businesses or franchises every day. He is a thought leader in digital marketing and entrepreneurship through acquisition and a mentor to many entrepreneurs.