What Type Of Business Should You Buy?

When you begin your entrepreneurial journey to buy a business, you may begin by asking yourself the question; “what type of business should I buy?”

Unless of course you already know the type of business you plan on buying.

You should ideally buy the type of business you know something about or have experience with from past work. But if you want to speed-up the process, and if you buy a larger business with employees that run the business, you may find it’s quicker and easier to buy a business you know nothing about.

If you already own a business, your decision is far easier, as you either look for a similar business to the one you already have, or you look to buy a business that compliments the one you own.

But if you don’t already have a business, you are effectively starting with a clean slate.

So, if you’re not sure about the type of business you want to buy, it might help you to know that when I decided to buy a business for myself, I was in the same boat as you.

I didn’t have a clue about the type of business I wanted to buy, and at the beginning of my journey to buy a business, I had also limited myself to the size of business I thought I could afford to buy too, as initially I hadn’t fully appreciated the concept of using other people’s money to buy a business at that stage.

Using other peoples money (OPM) to buy a business

But once I understood how I could use other people’s money to buy a business, including borrowing from the seller (or as it’s known; seller financing or vendor finance), this opened up my opportunities massively.

And whilst I still wasn’t sure about the type of business I wanted to buy, what I did know, was how I could buy a much larger million-dollar business, rather than a small one with small profits.

If you are open to the idea of using other people’s money, and to the idea of being agnostic about the type of business you buy, you’ll soon discover that there are all sorts of businesses available to buy, that make and sell all sorts of things and provide all different services.

It’s because of this very concept that made me think about creating this article (and accompanying video), which came about as a result of sitting on a plane, and watching one of those vehicles that push-back the aircraft from the gate.

It was by watching this vehicle that made me wonder who makes them.

Airplane push-back business

The type of vehicles I’m talking about, are very low to the ground, and have very large wheels that are almost disproportionate to the vehicle’s size (as in the above image). Which means they are very specific to the function they perform. But, there will be a business (or businesses) out there that makes these machines.

I’m sure the key components used to manufacture these vehicles, like the engine, the gearbox, the wheels and so on, are ordered in (from yet more businesses out there to buy), but the chassis of the vehicle will likely be the key design feature of the brand and something that this type of business manufactures themselves, and then they will attach the various pre-made components to the chassis.

Opportunities to buy businesses

Why am I tell you this? Well it’s to open your mind up to the opportunities that exist.

But whilst making your decision about the type of business you buy, always keep in mind the demand for the products or services each business you look at sells.

For example, the type of business that manufactures the airport vehicles I’ve just described, they will likely always have demand for their machines, so long as travelling by aircraft continues, and the aircraft continued to be made, such that they always need to be pushed back from airport gates.

I recall that soon after having bought my business, I met many different business owners, who owned all sorts of business types, which really opened my mind to what’s out there, and the many opportunities for would-be entrepreneurs and would-be business owners to own one of these businesses when the owners retire or sell for other reasons.

The business I purchased was In Bournemouth, in the south of England, I say “was” because I sold it a few years back.

Search for a business to buy on an industrial estate near you

This particular business traded from an industrial estate, which by its very nature had many other businesses trading alongside it, all of which did what those businesses do.

And if you’re prepared to put in the graft, this is where the opportunity lies for you.

This is because it’s far better to approach business owners directly, than it is to use a business broker. Not that business brokers don’t have their place, because they do. But if you approach business owners directly, you are more likely to find some of the best opportunities.

Where the opportunities lie is from the fact that many business owners are very reluctant to put their business for sale on the open market.

Which is not because they don’t want to sell their business, but because they are worried about their employees finding out before they need to know, or that their competitors find out and then exploit the situation and/or their customers may get to know and they may begin to worry about what could happen to the business once under new ownership in the future.

It’s for this very reason why I recommend networking as much as possible, when you start looking to find the right business to buy for you. By approaching business owners directly, and by building a relationship with business owners, you are more likely to be the person they will want to sell to.

Approach business owners directly to buy a business

Also, think about it this way. If you approach an owner who isn’t necessarily thinking about selling at the time you meet them, but then something happens soon thereafter, like for example a serious illness develops, who are they likely to contact first? Probably you.

If you’ve already made contact, and if you’ve already spent the time building a rapport with the owner, it’s more than likely you could be the first person they call.

As you think about this approach to buying a business, bear in mind that it’s not always about the money when entrepreneurs sell their businesses.

I can certainly vouch for that, having sold two businesses I owned outright, and an another one in which I owned a third share too.

Selling a business isn’t just about the money for entrepreneurs

The first business I sold, I wanted to make sure the new owner would look after my employees and customers in the same way as I did. This is the business I sold with seller financing, which is what opened my mind to how seller finance works.

The second business I sold, I sold it because I’d gone through cancer at the same time as the business had gone through turmoil, and I just wanted out…you could say I was burnt out, and it really wasn’t about the money in this case.

I’d just survived cancer where I’d been given months to live. That was in 2014, so I obviously survived, thanks to  Bournemouth hospital oncology department.

The third business where I sold my third share in an elderly care business, was because I wanted to get away from the in-fighting between my two business partners. They were brothers and a complete nightmare to work alongside.

It’s hard enough running a business, dealing with employee problems and customer challenges, without also having to be the go-between with in-fighting between two bothers, where one was threatening to kill the other.

So I wanted out, and this is the time when I decided to buy another business.

Do you need to know about the business you buy?

The debate you need to have with yourself when it comes to finding or choosing a business to buy, is whether you buy a business you know everything about, something about, or next to nothing about.

So, I’ve owned businesses in each of those categories.

One was an accountancy practice which aligned to my trade, which is because I’m a chartered accountant and chartered tax adviser. Although I didn’t buy this particular business, but instead I started it from scratch.

The one with the fighting brothers was an elderly care business, and whilst I couldn’t say I knew a lot about this business or the sector in which it operated, the company was one of my former clients, and when I sold my practice, one of the brothers approached me to invest.

During my time advising them as their accountant and tax adviser, as well as helping them development their business, I got to know a fair amount about elderly care, so I knew something about this sector.

The business I bought after the care business, although I actually bought it when I still owned the care business, was the one that I knew nothing about at all.

The business I bought designed, manufactured and fitted furniture. I knew nothing about any of this, and I’d never owned a business that operated a factory either.

All businesses have many things in common

I think for me and the way I approach running a business is that all businesses have many things in common.

All businesses have employees with various HR challenges. They all have customers, with varying degrees of customer service too.

On top of that, all businesses have the systems that run behind the business, like the accounts system, the system that deals with customer flow, the stock control system, if it has stock (or inventory), and so on.

But the other important thing to highlight, is that if you buy a big enough business at the outset, do you need to understand what the business sells, or how it works in detail, if it has the employees who know and understand the business, who deal with the customers, who know and understand the systems, and so on?

What I would say, is you should at least start-out with the intention of buying a business you know something about, rather than buying one you know nothing about. But keep an open mind.

The more specific the business you want to buy, the longer it will take to find

The reason I say that is because if you are very specific about the business you want to buy, it’s probably going to take a lot longer to buy a business. Unless you are happy to relocate for the right business.

Being very specific will limit your options, unless of course it’s a very common type of business, like a hairdresser, a restaurant, or a retail store. But then, are these the types of businesses you should or you want to buy in the first place?

I deal with the risks of each of these businesses in other articles and videos, but suffice to say, restaurant businesses are very high risk. Also, hairdresser businesses rely heavily on the relationship between the hairdressers and the customers, and if the hairdresser leaves, often times the customers leave with them.

There’s nothing wrong in being specific, but be aware your business buying journey may take longer, as it may take more time to find a business for sale in the specific sector.

Although, on the other hand if you are prepared to relocate, your chances of success of finding a business will improve. 

When I bought the fitted furniture business, I found it in a totally different location to where I lived, which was about 140 miles from where the care business was located. So, where there’s a will there a way.

Writing your CV will help you find the right business

What may help you in your entrepreneurial journey is if you spend time and write your CV. This is not for it to be shown to anyone, least of all the seller of the businesses you look to buy, but for you to review what skills and business experience you have.

This will help you to think about the types of businesses you may know something about, which may mean you can widen your search to more business types.

If you have any questions on this topic about buying a business, or on any other aspect about the process involved in buying a business, please drop a comment below.

And always remember that no question is a stupid question, if you don’t know it, you don’t know it, and by having the answer to a question you have, might be all it takes to move to the very next step in your journey to buy a business.