Small businesses play a significant role in the Australian economy. In fact, they employ almost half of Australia’s workforce and make up one fifth of the nation’s gross domestic product (ASIC). The continued growth and vitality of the small business sector have become an integral part of the Australian economy.
If you’re considering buying a business, these statistics should be very encouraging. However, with an average of 2.1 million small businesses in operation, it’s understandable if you’ve found yourself overwhelmed and indecisive about what industry to buy into.
Too many options can lead to more confusion and often leave you feeling paralysed. So, how do you narrow your choices down to determine what business is best for you? Take a look at these three factors to help guide you through your decision-making process.
Experience, knowledge, and skill
While you may be tempted to break the mold and dive into a brand new industry you know nothing about, it’s important to realise that doing so will entail a lot more work. It’s highly recommended to start with what you know, especially if you’re new to the world of entrepreneurship!
Having a degree or prior work experience in a particular industry probably gives you essential training, industry knowledge, a professional network, vendors, suppliers, and ultimately, familiarity with your target market.
Although you don’t necessarily have to buy a business in the exact same sector, it will benefit you considerably if you are equipped with a few compatible skills that you can utilise in your next field. For instance, if you’ve worked in cafes, your experience will readily apply to other businesses in the hospitality sector—i.e., bars, restaurants, and, to a lesser extent, B&Bs or hotels.
Your past experiences can help you draw up a short list to help you in the decision-making process. Ask yourself a few of the following questions:
- Which industries do I have experience in?
- What skills do I have, and can I apply these to other fields?
- Which of these skills can I apply to business in general?
- Which sectors did I perform particularly well in—or poorly—and why?
Your end goal
The industry you buy a business in needs to align with your overall future goals for your finances and lifestyle. This is a great time to determine your motivation for buying a business. Is it the desire to make millions, the thrill of taking risks, or is it more for the pursuit of an overall lifestyle change? So, ask yourself these questions:
- What is my budget?
- What type of capital is required, and what risk is involved?
- How important is making money to me?
- Am I a risk-taker, or do I like to play it safe?
- What sectors are most promising in terms of future prospects?
- What do I want my lifestyle to look like?
A good place to start in your decision-making process is to consider the differences between an independent business versus a franchise and retail versus wholesale.
How much control do you want? While a franchise will offer you a firm foundation to launch from, the amount of ultimate control you have will be limited. However, an independent business will give you just that. You’ll have complete control over every decision and process; you will just have to be ready to lay the foundation from scratch.
Next, ask yourself what type of people you want to work with on a daily basis. Are you customer service oriented, or would you rather work with industry professionals? Your answer can help determine if you’re a better fit for the world of retail or wholesale. Remember, who you spend your time with every day can determine the amount of enjoyment you’ll get out of your business.
Stay true to yourself.
Ultimately, passion should be the driving force behind your decision. Owning and running a business is hard work and takes endurance to push through the obstacles to achieve success. Truly loving what you do every day will be the fuel you need to keep going when things get tough.
To set yourself up for a financially sound future, be sure to find what you love and pick a business that matches that passion. Being passionate about what you do will increase your job satisfaction, enthuse your employees, and impress your customers.
Sit down and make a list of what you enjoy doing, as well as the tasks you find tedious or stressful. For example, you might enjoy interacting with people or working outdoors; your dislikes might be working at a desk or working evenings and weekends.
This activity will help you draw up a short list that fits your talents, personality, and circumstances. Here are some helpful questions to ask yourself:
- What am I passionate about in life, and what does this say about me?
- What elements of my past jobs have I loved?
- Are there things that I don’t like that may be a barrier in certain industries?
Ideally, your choice will encompass some combination of two or three of the factors outlined above. For example, don’t buy an online retailer just because you anticipate low overheads and strong growth prospects—if you lack the requisite skills, experience, or passion for what’s involved in the day-to-day operations.
One final note, even if you’ve worked in your chosen industry for decades, owning a business takes significant research and preparation. From location to competition, the more leg work you put into compiling valuable information available about your industry and then making informed decisions, the more successful you will be.
