Workzone: Entrepreneurs may not fill bill of owner
April 14, 2013 8:00 AM
By Ann Belser Pittsburgh Post-Gazette
Anyone who has ever worked for someone else has considered working for themselves.
The problem is that plans A, B and C are often derailed, not by logistics, but by the personality or the personal needs of a potential business owner.
For instance, if a person wants to work 9 to 5 on weekdays only, a restaurant would be a bad fit. Just as an extrovert sort should probably not spend days as a bookkeeper, an introvert should probably not buy a Valpak franchise, which is entirely about sales.
Roger Murphy, founder of Clearwater, Fla.-based Murphy Business & Financial Corp., which franchises business brokerages, said any potential buyer of a business has to be careful not just to kick the tires and slam the doors, but also make sure he is a good fit for the driver's seat.
If someone doesn't like managing people, then a Merry Maids franchise would be a bad fit since it is all about getting house cleaners to job sites.
Once a person determines the type of business he wants to buy and finds one for sale, there are other considerations. As with any seller of a house or a car, a person selling a business is going to want more than it is truly worth.
Mr. Murphy said it is important to get a good look at the books and make sure the financial statements are proven and verifiable.
In public companies, the emphasis is on making profits as big as possible. In a private business -- a business that has to pay taxes on profits -- the incentive often is to keep profits to a minimum, maybe by hiring or putting the money back into the business.
Mr. Murphy said when a business owner gives a wink to a prospective buyer saying there are other revenues that aren't reported, never, ever believe it.
"If you lie to the IRS, you are going to lie to me," he said.
Outside of the money, there are other issues to check. For instance, make sure a lease on a restaurant or retail space is stable. Also, make sure the business isn't in an industry that is phasing out, like video stores that were a hot property in the 1990s. "You can't give them away now," Mr. Murphy said.
Then there is the consideration of how dependant the business is on the current owner.
If the owner is integral to the sales -- and customers buy the product or service primarily because of that relationship -- then losing that key player could mean losing the business.