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Xero Awards

Buying a Business. Dream or Nightmare?

 

 

There is a lot more to being a business owner than having money, this can be a very hard lesson for new owners to realise.

 

This is the first of 4 articles dedicated to those of us who dream to be in control of our own destiny. We have access to capital, life experience and a dream to work for ourselves in a collaborative environment.

 

Often the first step into business for ourselves comes from a small push from our environment, you don’t like your current role, you have an opportunity offered to you, or you just want more. More Life balance, more money and more opportunities.

 

FIRST question you should ask yourself –  what is the emotional commitment?

 

Why am I looking at buying / setting up a business? This is an emotional question, you are testing your own assumptions. My suggestion before you make the jump from paid employment to self-employments is find a Black Hat ( some one who looks at all the worst outcomes) and talk your reasons through with them. Get an independent opinion, and then write down the Pro’s and Cons of what you are planning.

 

Remember, one of the most trying parts of being an Entrepreneur / Business Owner is that you no longer have a team around you who are there to give you feedback.

 

“Make your decisions with your heart, and what you will end up with is hear t disease" Harvey McCall, Swim with the Sharks.

 

SECOND question – have you done a market validation?

 

Market Validation is a term used to describe the process of collecting information that will help you understand what the Critical Drivers of the market are, what your Unique Selling Point is, who your competitors are and how your competitors compete.

 

Before jumping in feet first take time to research your opportunity, learn about the market, key people, life cycle of the market and your product, barriers to entry and exit.

 

In summary don’t just believe what you are told, validate it yourself.

 

THIRD Question – have you done a financial evaluation?

 

As an accountant and business advisor one of the more challenging tasks I have is to get investors with an opportunity to STOP them jumping to the bottom line. What am I going to earn?

 

This is not the place to start, it is the place to finish, after you have worked through the tough questions of, Is this what I want to do? (Question 1, Emotional Commitment) and, Is there a market for me to invest in? (Question 2, Market Validation).

 

Building financial models & budgets is easy, there are some great tools available like, Xero & Spotlight Reporting. But don’t be fooled! without putting the hard yards into market validation your financial modelling could be based on poor assumptions, out of date numbers or a changing market place that has a reduced gross margin or a changing volume.

 

Well I hope that I have caught your interest, in our next blogs  we will

 

look at some of the more relevant topic under each of the questions.

 

 

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