Buying a business at “Good Will”

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Some of the advantages and disadvantages of buying a business as opposed to starting one from scratch. What two ways can one buy a business and which is preferable? Why?

When you think about whether or not to buy a business, the first thought to you mind should be, how much return can I gain from it? Is there an established brand, and customer loyalty that will favor my investment? This of course isn’t the only reason to buy and take over an established business. You must also take into consideration, if you have experience in this field of business. While being a business banker, I have the opportunity to meet many businesses from all types of background and industry, and one common mistake I see is people with little to ZERO experience buy businesses that have NO clue how the industry works. They look for ways to invest their savings in order to achieve higher profit margins than your typical savings, money market, and investment retirement accounts. However there is still a key piece that is missing, EXPERIENCE. If you don’t know how to manage a restaurant, than it is best you don’t immediately buy an established restaurant. WHY? You ask? Because there is more than simply attending clients, and fulfilling orders, you need to account for the marketing aspect, the fact that you need to be there 24/7 taking care of the take over phase while the current employees get used to the new boss (YOU).

Starting a business from scratch is much favorable for those who have the experience in the industry and want to branch out to either serve a niche market, such as a chef branching off to open their own restaurant to serve his own receipts and food creations. As a business owner you can establish a brand new business if you already have the experience in the field. If you have no experience in the field than I recommend you invest in hiring experts to run your business, because the biggest part of taking over an established business is making sure you can maintain a well deserved rate of return on investment. Take time to research what type of business you want to buy and take over if you have investment capital to spend, however always take into consideration to have experts on your side of the playing field in order to not throw your money away simply because of a splurge of a business you liked.

You can buy your own business by contracting a business consultant who has many years of experience in the field and can help you find your ideal business; he/she is like your agent.

Or you can also do the research on your own if you understand your industry and can rely on your expertise to find your ideal business. Which one of the two is favorable? That is up to you to decide.

 

Is there such a concept as ―good will‖ in reality and is it transferable? Why or why not? Give an example.

There are a number of “good will” companies that currently serve the community, such as non-profit organizations. Non-profits are built to serve a purpose, a cause, and a community. It is run by experienced managers, executives, etc.… who sometimes do in fact get paid sometimes salaries over millions of $$ a year. Yes that right, Millions of $$! Now some people might wonder why the heck do they get so much money? Well in fact a lot of non-profit schools, hospitals, etc. need to have experienced executives to run the organization, and this comes with a price! Of course in fact non-profits run like a business, in contrasts however there are a lot of tax savings and benefits that the corporation can received however it doesn’t have a different of business structure. It still has managers, HR, accountants, engineers, doctors, etc.

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4 thoughts on “Buying a business at “Good Will”

  1. Silvestre,
    Great post!! I agree that within owning or buying out a business there are more things attributed to a business’ success than just fulfilling customer orders and keeping up the business–“EXPERIENCE” is most definitely key and most important in managing anything in life. Although, you already have a business up and running do you think you would ever purchase another business? If so, what kind and why?

    • Once I start working on a project or business idea I tend to have ownership of it, therefore I don’t think I would ever buy out a business only because I like to take pride in what I create.

  2. Upon reading your take on people buying restaurant, my first thought was Gordon Ramsey. While that is a reality show, I find it remarkable how true to life it is – many of the restaurants were failing simply due to inexperience, the owners “getting in over their heads.” How often does this happen in other fields, do you think?

    • When your building a business it is necessary to not let the idea get you carried away from the overall objective. Sometimes we focus solely on the now issue versus preparing for the future issues we can encounter, and definitely agree that being too full of your idea can harm your business, of course like in the show you mentioned, the competitor need to be more open minded and open to critics, as really any entrepreneur or business owner. We can only fix those things that we accept to fix.

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