Owning a business is surely the best ways for you to create wealth that will last a long time, but there are a lot of challenges involved, and that is why acquiring a small business might be a welcomed idea.
Some of the challenges might include not having have the funding, connections, or world-changing vision required to get moonshot ideas like Tesla, Amazon, or SpaceX off the ground.
Or maybe you have a business but are struggling to build momentum. Or you have a franchise but want to create something of your own.
All this factors mentioned above are good reasons for your to acquire a small business. So what is our goal with this article?
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We are going to consider the necessary steps you need to take to help you acquire a small business and some profitable small businesses you can take advantage of. Let’s get started.
- Figure out what you want in a Small Business
- Respect the Businesses Products and Customers
- Connect with the Business Owner
- Decide Who Stays
- Make this Simple Calculation
- Put a short-term material retention program into place
- Finance the deal with Little Money
- Profitable Small Business ideas
Figure out what you want in a Small Business
The best opportunities are small companies earning between $1 million and $10 million a year in revenue. Look for simple business models with little investment competition, such as professional services like construction, engineering, and plumbing. But the best sector is the one that speaks to your interests and experience.
At the same time, you may not even need personal experience in the industry—because you may be able to work out a deal in which the business owner trains you. If you don’t want to manage the day-to-day operations yourself, you can hire an experienced professional or promote from within the company while the owner is still around to train them.
You can usually find someone doing the same job for another business and incentivize them to leave their salary for equity in your company.
Respect the Businesses Products and Customers
Whether or not you plan to keep the existing business, or are moving the talent into your own operation, you must respect what that team built in terms of product and customer relationships.
This is what they sold their soul to for two or maybe three years. If you upset their customers or dismiss their product through a lack of respect, you are going to end up with a lot of very frustrated engineers on your hands.
Even if you only wanted the team, there is a chance they will want to leave because they are embarrassed about what was done to their product.
Connect with the Business Owner
While demonstrating smart plans for the business is important, your pitch should be about more than that. For many owners, their business is their baby — which means they care about more than money.
They want to know that you’ll look after the brand and reputation they’ve worked so hard to build. So they may be wary that you will lay off their long-time employees or damage meaningful relationships.
Focus on why you will be the best steward of what they have built by demonstrating that you’re trustworthy and will continue their legacy. How?
Build rapport, ask questions, and speak directly to their concerns. Show that you care about them rather than talking about yourself the whole time. It’s even better if you can position yourself as a young, eager version of them.
Decide Who Stays
Sometimes, if you are buying a high-growth company in the Internet space, typically 15 percent of that team will leave. Ensure you retain the other 85 percent.
You and the selling company should know immediately who you will want to stay and who you don’t mind losing. If you do not want certain members of senior leadership, then make the decision early on. Treat them with respect but make the decision early.
Any person beyond the 15 percent that you lose should be seen as a failure because everyone plays a critical role in the DNA of a small company. So take the 15 percent loss and work to not lose anyone else.
Make this Simple Calculation
Offer to sign a nondisclosure agreement, so the business owner is comfortable sharing their books with you. Confirm that there’s more money coming in than going out and that cash flow has remained consistent over the past three years. Then ensure there’s enough profit to cover the cost of financing.
In addition to profitability, consider whether the business has opportunities for improvement, particularly if it’s weak in an area where you excel. You can often double your profits just by improving marketing or operations, for example.
Put a short-term material retention program into place
It will indeed be a tough period for current employees. There will be change. To help quell employee fears, put into place a short-term material retention program.
Remember they just lost their hope of changing the world a little bit so it is critical to get them through that period and to a point where they buy into you as their new leader. Putting a short-term incentive program or retention program in place helps ease that transition.
It is important to remember that the retention program needs to be material, and at least be as big, or double, as their expected bonus. This will help the transition period, and help retain your new talent.
Finance the deal with Little Money
Many financing options don’t require your own capital — or any at all. If the owner is motivated to move on, you can often buy a high-potential business for next to nothing.
Some business owners will let you pay them back over time using the profits from the business. If they want to be paid up front, you can secure a loan from a financial institution that specializes in acquisitions.
Banks can use the business profits as collateral; they’re less interested in your credit and mostly want to see that you have skin in the game.
You’d be surprised how much of the financing terms are negotiable, so brush up on your sales and persuasion skills. It’s common to pay no more than 30 percent of the purchase price at closing.
If you can find experienced investors to loan you the money in exchange for equity, you can use the profits from the business to cover the interest payments.
There are other deal structures, but the point is this: Rather than acquiring debt to fund an unproven idea, it’s possible to buy an asset that has the cash flow to pay for itself.
Profitable Small Business ideas
Catering Services
You don’t need expensive premises to run your own catering business and could even operate your service from home, keeping overhead to a minimum. People and businesses are willing to pay for quality caterers, making this business profitable for those who work hard and have the determination to succeed.
Website Design
Websites have become the ‘windows of every successful business’, hence quality and creative website designers remain in high demand. Again, low expenses and high rates make web design a lucrative business to run, providing you have the creative and technical know-how that is.
Business Consulting
Businesses are willing to invest in quality business consultants who can help them achieve the results they are looking for. They’re also willing to pay hefty amounts for the right advice, which, tied in with low overhead, makes business consulting a profitable business to embark on.
Of course, effective business consultants do require sound business acumen and knowledge, so this isn’t necessarily the right opportunity for everyone.
Courier Services
Other than the outlay of your vehicle to deliver the goods, self-employed couriers don’t have a large overhead. Getting lucrative contracts from the major courier firms can prove profitable. However, in a competitive market, being awarded lucrative contracts can be challenging.
Mobile Hairdresser Services
Granted, you can never charge a fortune to cut someone’s hair but that doesn’t take away from the fact that quality hairdressers will always be in demand. Furthermore, other than a quality pair of scissors and some hair dye, if you run a mobile hairdressing salon, your business expenses are surprisingly low, making mobile hairdressing a profitable business to run.
That said, mobile hairdressers are not difficult to find, so you’ll probably need to spend some money marketing your services.
Cleaning Services
All you need to start your own cleaning business is a vacuum, polish floor cleaner and, preferably, a car. With comparatively low overhead, little in the way of training required and a service which is always in demand, cleaning can be a rewarding business to get into.
So why isn’t everyone doing this? Well, if you’re looking for a more creative way to make a living, cleaning might not be for you.
Online Tutoring
You might be a math genius, a native Spanish speaker or a nifty guitar player. Whatever your talent, offering to tutor online can be a great way to earn an income with exceptionally low expenses.
The only downside to online tutoring… You need to have a skill others will want to learn!
Real Estate Brokering
The profits associated with real estate remain high and if you want to enter this industry one of the most cost-effective ways to do so is to set up a real estate brokering firm.
Real estate brokers act as an intermediary between sellers and buyers and all you need to get started is a brokerage license. That said, finding your own clients can be challenging, given the number of real estate brokers there are.
Logo Design
Got an eye for a great logo? If so, you might be on your way to starting a business where you can charge a tidy sum while not having to fork out on expensive overhead. Though be warned, logo design is a competitive industry, and you’ll have to come up with some unique and inspiring logos to remain at the top of your trade.
Warehouse Storage
Got a spare garage or building that’s not being used? If so, you may want to think about offering warehouse storage services. Providing a place for businesses and individuals to store goods and items can provide a highly profitable and predominantly passive income. Though it must be said, the job isn’t exactly stimulating and therefore isn’t for everyone!
Property Maintenance
There will always be a demand for people who are willing to clean gutters, repair chimneys or pull out stubborn weeds. While the hourly rate for property maintenance might not be the highest, with low overhead and high demand, property maintenance can be a profitable business to enter — as long as you don’t mind getting your hands dirty!
Technology Repair Services
Got a good eye for technology and how it works? If so, setting up your own technology repair business could see you in high demand as the world becomes increasingly dependent on technology.
Repairing people’s much-loved gadgets can pay well and without much overhead, can prove to be a lucrative business. Naturally, those without a knack for technology will want to steer clear!
Food Truck
Providing quality food and drink will always be in high demand, though with expensive overhead, running a restaurant isn’t always as profitable as you might think.
Serving food from a food truck, on the other hand, requires much lower overhead and can be an extremely profitable business venture. The downside is you have to work out of a van day in, day out, which isn’t everyone’s idea of a rewarding business.
Legal Services
Quality legal advice and support come at a price and therefore those with legal knowledge can earn a tidy sum for their expertise. That said, becoming qualified to provide legal advice takes time and money and the amount of training and education required to be able to offer legal services can put many people off.
Marketing Services
Businesses and organizations will always want a quality marketing team behind them to boost brand awareness and bring them results. Marketing agencies can charge a lot for their services and thanks to advancing remote technology and the internet, marketing efforts can be done remotely, keeping overhead low and profits high.
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Still, it must be said, marketing agencies are highly competitive and in order to be a success, you’ll have to show you can deliver results.
Personal Training
Those who want to be fitter, slimmer and healthier, insure there will always be demand for personal trainers (PTs). Earning a qualification in personal training is not overly expensive and once you’re professionally qualified, you can offer your PT services. Overhead is inherently low in this industry, making personal training a profitable and sought-after business.
One of the biggest challenges PTs face is building up a network of clients in a competitive environment.
Congratulations! You are the owner of an established, profitable business. Whether you stay involved in the day-to-day or step back and let others do that, you now have a valuable asset — and more personal freedom.
