Thursday, November 27, 2014

Buying a Business — Part 3
Close, but No Cigar

Just like when starting a business from scratch, exploring the possibility of buying an existing business is a roller coaster of emotions, both good and bad. But at the end of the day, you have to be honest about how much work, money, and effort, you are willing to invest.

In my case, the numbers simply did not meet expectations, and the amount of working hours I would have had to devote to the business, made no sense whatsoever.

And it's too bad since I really liked the business and the products it makes. But that alone was reason enough to think twice about acquiring it. Liking a business is important, of course, but as I did find out during my required "familiarization" period, the learning curve was too steep and I was outside of my comfort zone.

In addition to that, the real eye-opener happened the moment I started playing with different financial scenarios on a spreadsheet, as I realized the financials simply did not add up. I am not saying the seller misrepresented the numbers, but if I were to buy this business, I would need to implement a few things that would've basically turned slim profits into losses, and that was sobering.

Just to give you an idea as to where the numbers started to head south, was the fact that the seller (and also the business operator), hardly ever turned on the air-conditioning system for the workshop and office areas, something that is unacceptable here in the sunshine state, at least eight months out of the year. This meant that, the moment I adjusted the monthly electricity expense, my spreadsheet changed dramatically.

The same happened with things such as website maintenance, where the current site is old-fashioned and in desperate need of a redesign, including the addition of ecommerce capabilities, which would bring the monthly cost from an absurd $8 (yes, eight bucks), to a more realistic $200 per month.

Add to those changes things such as monitoring for the alarm system (which is currently dependent on a neighbor calling the seller's cell phone when it goes off), to upgrading the 10-year-old multi-function color copier with a newer unit (and a higher monthly maintenance fee), even to turning the office lights on during normal business hours, and the claimed "profits" disappear into thin air.

I am not criticizing how the seller manages the business. Everyone is entitled to run his or her business as they see fit, but as a potential buyer, you must use your numbers to make sure the business will make you money.

And so, after looking at the out-of-pocket amount I would have to invest to purchase the operation, plus the negative bottom line, I simply decided that it was not worth the effort necessary to turn it into a profitable business venture.

So for now, I've decided to save my money and look for a job instead.

Of course at 55, this is easier said than done. But being a life-long gearhead, I've decided to look into selling automobiles as my next profession. Yes, it can be a challenging way to earn a living but I am curious enough about the industry, and up to the task.

Most people dislike commission sales, and I can understand why. But, on the other hand, the sky's the limit as far as earning potential, and I see that part as a huge plus.

Who knows if in a few months I will get sick and tired of that pay model, but for the time being I am willing to give it a try to see if I can make it happen.

So stay tuned to see if, first, I can land a job at a good dealership, and second, if I can handle the pressure and be successful selling automobiles.