Could 2016 be the year you take the leap into your own business?
The great Aussie dream is to own your own home, and increasingly – work for yourself. “Most people want to be their own boss at some stage in their lives but many don’t know how to take the first step. They think that owning a business is really expensive but that’s not always the case“, says Steve Finn, CEO of Australia’s largest business broker network, Finn Business Sales.
According to an internal study at Finn Business Sales, 54% of people that purchased a business through Finn in 2015, were in fact leaving their jobs and entering the world of business ownership for the first time. The remaining 46% had owned a business previously and were buying another business.
If you want to set out on your own, Steve Finn recommends two main things that you should consider. Firstly, what type of business should you go into and secondly, how will you pay for it? It’s important to have a selection criteria that fits in with your personality, experience and goals. If you haven’t bought a business before, it helps to get assistance from someone that has so they can help you to identify these things clearly.
“Many times we see people come to us looking for a business and they say “I want one that makes a lot of money”, and this really isn’t where they should be starting” Steve Finn says, “We can find you a really profitable business, but it will only stay profitable if it’s the right business for you. A lot of first time buyers, want to buy a café because they think that there’s good money in coffee and coffee is popular but that’s not really the right reason to go and buy a café’. Talk to a café owner – it’s not all beards and friendly banter – it’s a tough slog.”
The hospitality sector can be a trap for first-timers says Mr. Finn. “Many café owners will tell you that it’s one of the hardest things they have ever done. They’re usually on their feet six or seven days a week, with ongoing issues like there’s no tomorrow. Staff don’t turn up when it’s supposed to be the owners only day off for the week. The supplier’s don’t deliver your ingredients for the day, or the coffee machine is playing up. If it’s not one thing it’s another – so you have to be tough.” On top of that are the financial implications. “Many café business owners burn out after only two or three years in the café business and have to sell the business for a lot less than they paid for it.” That gap can turn into a financial nightmare that can really set individuals and families back. “The last thing you want to do is buy a café for $300,000, and sell it two years later for $150,000. I’ve seen this happen too often over the past 10-15 years and in most cases it could have been avoided. Our business culture at Finn is very unique, we take particular care to help people buy the right business. People appreciate it, and we get a lot of testimonials from happy buyers and sellers”, say Mr. Finn.
To be successful in business, it’s a simple recipe according to Mr. Finn. “A positive attitude, enough money behind you, and a genuine desire to help your customer – that’s pretty much all you need.” There’s another common thread among those that are successful. “If I look across the hundreds of people that have bought a business through Finn and gone on to great success, the common trait most of them share is resilience. They ride the ups and downs – both financially and emotionally. They stick to it. They learn and they keep improving the way they do things. It’s a great education, and a great way of life” says Mr. Finn
Finding the right business can be time-consuming and confusing. It’s estimated that of the more than 740,000 small businesses in Australia, at any one time there are more than 74,000 on the market. The best way to choose the right business is to start by taking a look in the mirror, Mr Finn says. “Examine your personality, your likes, dislikes, strengths, weaknesses, and natural abilities. What experience have you had that can set you up for success? Then finally – what are your business goals? How much money do you need to make to pay not only the business overheads, but also the household expenses. If you’re a people person, it could be a good idea to go into a retail business. If you know you’re not a real people person, don’t put your business at risk by buying a business that relies on that. Think of a publican with no personality – the pub probably struggles to make much money.”
When it comes to funding, this can be relatively straight forward if you first understand that getting money to buy a business is a lot different to getting a home-loan. “We see business funding getting easier as every year passes. There’s a lot of different approaches available now to put together the capital for a business including some of your own cash, money from outside investors, family loans or obtaining finance through a financial institution.” Getting finance doesn’t have to be difficult if you know where to go to and how to go about it.” Most new business owners use borrowed funds says Mr.Finn. “Our internal numbers show that about 78% of buyers borrow money to fund the purchase of their new business. That’s the reality – you don’t have to be rich to buy a business. If the business is profitable, it pays the loan off itself. That’s the great thing about buying a business. If you buy a house or a car, they aren’t going to pay themselves off – but in most cases a business will.” Another emerging trend is the increasing boycott of the banking sector. Many successful business owners are avoiding approaching the major banks, and choosing to get financing for their businesses using commercial finance brokers. Steve Finn advises, “Quite often the last place you should go for funding for a business is directly to your own bank. Banks are often not helpful with small business loans and secure most of it against your family home anyway. You will likely pay a higher interest rate with the bank for the privilege of putting your house on the line!”
A commercial finance broker can look at all of the options from several different banks and other finance providers. Funding options such as equipment finance, a line of credit and cash-flow finance can sometimes be better instead of a standard business loan. “The great thing about using an independent finance broker is they work for you, not for the bank” says Mr. Finn. Industry bodies such as the Mortgage and Finance Association of Australia have a Code Of Practice that all members are required to adhere to which essentially obligates the broker to act in the best interests of their client and to recommend the best finance options for you the borrower, not the most profitable for the lenders.
So will you be one of those to take the leap into your own business in 2016? There’s no particular industry that says you are more likely to leave your job according to Mr. Finn. “We have more than 1,000 new people contact us every month and that has almost doubled since last year, so we have a real insight into what people are saying and the type of industries they are currently working in. Across the board, there’s no pattern. We’ve had a lawyer buy a gutter cleaning business, a fireman buy a coffee shop, once we even had a person who types Hansard in Parliament buy a gardening business – the common thing with them all was they wanted a new challenge, and to build a better future for themselves and their family. That’s the fulfilling part for us, helping people find that right vehicle that gives them that satisfaction.”
Which business suits you best?
Finn currently has over 1,100 businesses listed for sale across Australia and receives over 1,000 new enquiries per month from people interested in buying a business. Whilst there are always exceptions to the rule, through analysis of our data across the last ten years, we’ve found that certain people are most successful in certain types of businesses;
Are you a sales or marketing professional?
Retail businesses, business brokering or mortgage sales. You’ll definitely be a ‘people person’ and be good at the art of selling.
Are you an accountant or finance manager?
Bookkeeping businesses, accounting practices, tax return businesses, property management, business consulting and generally businesses in the B2B sector. These businesses generally require certain qualifications and you may already be working in one of these fields for someone else.
Are you a school teacher, police officer, nurse or in the armed services?
Franchise businesses that have a system and structure, printing businesses, home-based businesses, fencing, home services, maintenance, tile repairs or car detailing. You’re probably used to working outside of a 9-5 and these types of businesses will often require weekend work.
Are you a factory worker, taxi driver, fast food employee or retail employee?
A home services business, window cleaning, commercial cleaning, lawn mowing, gutter cleaning, skip-bin hire, mobile coffee van, auto-dent and scratch repairs. Certain businesses will have systems and processes in place to help you to successfully transition into business ownership.
Are you an experienced business owner?
Managed businesses or businesses that have a lot of staff including high sales volume businesses, restaurants, cafes and hotels. You will most likely be good at recruiting, training and managing employees.