Following the Proper Search Methodology
Looking for the right business takes a significant amount of time and effort; and unfortunately, too many people select a business for the wrong reasons, which only compounds the risk of failure.
The typical (and very risky) way to find a business:
When most people start to consider becoming self-employed, they typically follow one of a few paths, i.e.:
- They begin looking for a “good” business – in other words, a type of business that other people have been able to be successful with.
- they look at businesses where they have a strong passion for a product or service
- they look for a business that is being driven by current “hot” market opportunities
- they look for a potential partner to go into business with
Whichever path (or combination thereof) they choose, these methodologies enable them to have a reasonable “gut feel” of what the ideal business looks like, so they begin their research and go on the search for possible opportunities. Usual hunting grounds include the internet, to business opportunity magazines, to franchise shows, or even business brokers, until they have a few businesses to consider. They then compare each of the businesses against the other options, do some research, and eventually settle on the best one of the businesses they were considering. Unfortunately, this method causes most people to make a very critical error – because they only compared the businesses against each other, instead of comparing each business against their ideal business model.
You see, the above methodology only gives a partial understanding of what you want in a business, so your research is incomplete and is often skewed by emotions, and is thus driven by the opportunities… which results in a less-than-optimum choice business purchase.
The Proper Search Methodology
The key to buying a business is to begin with the end in mind; in other words, reverse-engineering your search for the ideal business. You need to have a solid understanding of the logical reasons why owning a business would be a viable career choice for you, while also recognizing what the key emotional aspects are. Logical elements are connected to your skills and abilities, while emotional elements are connected to what will motivate you to perform the required work, day-to-day and week-to-week, i.e.:
Emotional:
- What is your purpose for wanting to own a business – i.e. lifestyle, income generation, control over destiny, etc
- What type of work you like to do (which is not always the same as your core skills)
- What type of work you don’t like or want to do
Logical:
- What your core skills are
- Several “operational” criteria, i.e. location, venue, desired hours, # & type of staff, earnings, etc
This is quite an onerous task, and because most people have never done anything like this before, it is also very difficult to fully figure out. This is where the services of a skilled business matchmaker really becomes important– they’ll help you sort out the most important to least important elements, and gain crystal clarity on what your ideal business model needs to include. Once this step is completed, only then are you ready to begin your search for the right business, using this model as the template against which you qualify, and disqualify, all possible options.
Your choices:
There are a tremendous number of options in self employment, but most fall into these general categories: starting from scratch, buying an existing business, buying a franchise, multi-level or network marketing and finally with limited frequency, conversion franchising. There are advantages and disadvantages to each type and some categories are far more risky than others; within each category are some strong business models, but there are usually a lot more weak or questionable ones too, which only compounds the risk of failure.
Now the real research begins:
Once you’ve narrowed your options down to 3 or 4 possible matches, now the real research begins. You need to get a full understanding of the business model – from the only credible source there is – from the people who are already operating the same or very similar type of business, in similar markets. Franchised opportunities clearly have the upper hand here because you can get the initial overview of the industry and the specific go-to-market strategy from the franchisor, then you can validate the business model with a sufficient number of existing franchisees (ideally at least 8 – 10). It’s the franchisor’s job to explain the business model to prospective franchise owners, and existing franchises are expected to share their experiences with prospective franchisees.
If you’re considering independent businesses, it’s incredibly difficult to get anywhere near the same level of information. First, there’s no one to give you a strategic overview of the industry – you have to figure that out on your own. When you want to get a ground-floor understanding of the business, it’s incredibly difficult to get other independent business owners to share anything with you!
For these reasons and many others, franchised businesses are considered by most experts to be the least risky way of going into business.