Follow-Up on Sub-Par Business

In an earlier article I stated some of the reasons why in some cases buying a sub-par business (one not very profitable, if at all) can be a wise decision because of the potential higher return on your investment. This is based on your ability and insight to "see the light at the end of the tunnel" as we say. The current owners may not be doing the things needed to be successful; expenses may be too high, cost of sales not realistic and lack of effective marketing are some areas to consider. As a new owner you can change these things and should see some turn-around in 6 to 12 months.  Even debt on the business can be restructured or partially paid by the current owner out of the sale proceeds.

Sure, buying this type of business takes some work and new ideas but if you're up to and and can tolerate some risk this may be the way to bigger success. If not, buy a high priced profitable turn-key business or a franchise with a proven track record. But even then with a higher probability of success a small percentage still can struggle or even fail. All the extra money paid up front (including franchise fee) is gone the day you take over or sign the contract. If you are more of an entrepreneur you can use that extra up front money you didn't pay, to improve, renovate and increase marketing on that business that's more of a risk. Then the money is your investment not someone else's profit.

It's your decision and I know some people can't stand the risk and put their money in the bank at a guaranteed 1% and lose to inflation instead of a mutual fund which usually averages 7-10% most years. For me, I have always taken the risk and in most cases have come out ahead. As soon a someone says it can't be done, I perk up and figure out a way to at least try it as a calculated risk. When I'm successful I know I will have little or no competition because everyone else gave up or didn't try. If it doesn't work I just keep looking for another opportunity that always seems to turn up. Whatever your decision success is waiting for you, unless you don't try at all.

Barry is a marketing and customer service speaker, trainer, author and business consultant. www.idealetter.com