Looking Beyond the Numbers – How to Buy a Profitable Business

There are four vital factors to consider when choosing a business that will turn a profit, writes Neil Barker, Managing Director of Barker Business Brokerage.

Owning and running a business is probably one of the most rewarding and at the same time challenging endeavours that an aspiring individual may engage in. To buy a business successfully, a prospective buyer needs to evaluate many factors. Furthermore, a business venture is not just something that can be expressed in asset value or revenue streams – it also has a soul, an idea behind it. Consequently, you would often need to look beyond the numbers when deciding to buy a business. This is not as complicated as it may seem – here are four of the biggest considerations:

1. Experience

What is your professional and personal experience with the business you’re looking at buying? An entrepreneur should be interested in the business he or she runs – and be good at it. However, if operations of a particular business establishment are outside your area of experience, this does not necessarily mean that you should not buy a business in that field – but if there is a lack of experience, you should at least make efforts to retain the key employees or hire suitable replacements. Ultimately, this will translate into higher profits.

2. Location

Will there be enough demand for your services in this particular area or is the business selling online to a much larger audience? Will this demand change in the future? In addition, the future vision of the business will likely be developed. Is there scope to grow the business and will you have the working capital to expand it if this is your goal?

3. Advice

A purchaser will want answers to such questions as, “What kind of business should I buy?” and “How do I know it’s a good price?” Additional concerns arise once the reality of buying a business starts to sink in. Then buyers will want to know, “How much money do I need to operate the business properly?” and “When will I start to show a profit?” The novice may not even know which questions to ask, not to mention having a clue about the answers. In this situation, free advice is both available and worthwhile. Even the cost of paying for such advice is nominal, therefore getting advice from professionals is essential.

4. Value

There is not a single best method to determine the precise value of a business – the recommended approach depends on the venture and industry. However, it is essential in all cases to learn the history and way of operation of a particular business. To evaluate and then buy a business for maximum profit, it is also recommended to use the services of an experienced business broker, such as Barker Business Brokerage, as you and the seller of the business will probably have a different opinion and perspective on many issues. A good business broker will be able to offer you very valuable guidance in this area.

Brokers are a good source of free information as to which businesses are available to buy.

Advice on buying a business

There are many resources available to prospective business owners; here are some places to start: Online - There is a huge amount of advice online, but caution must be exercised: is the advice is in your best interest?

Business brokers - Business brokers match up business sellers with business buyers. Brokers are a good source of free information as to which businesses are available to buy, but keep in mind they will usually try to steer you to companies which they have for sale. Here at Barker Business Brokerage, we are happy to give you free advice. Lending institutions - Bankers have their fingers on the financial pulse of a community. By going to a banker for advice, you begin the process of creating a firmly entrenched professional relationship that could also open the doors to funding your purchase. Professionals – Primarily accountants and solicitors. Both fields attract business-type thinkers, and their level of general knowledge on how to buy a business is nearly invaluable. Buying a few hours of their time is money well spent. Business advisors – There are many available to give you advice for a fee.

Here at Barker Business Brokerage, we’ve been matching quality business with great buyers for years and understand the highs and lows of the process. Because it’s what we specialise in, we’re here to make the transition as smooth as possible for you as you enter business ownership. Whether you’re a first-time buyer or seasoned in business ownership – we’d love to hear from you and assist you with your journey.

Top 5 industries for profit growth in 2022

Stats NZ has released its March 2022 quarterly business results, showing actual operating profit values for each industry and how it compares to the same quarter in 2021. Here are the top five:

1. Food, beverage, and tobacco product manufacturing: up 86.2% 2. Transport, postal, and warehousing: up 39.6% 3. Wood and paper products manufacturing: up 36%

4. Wholesale trade: up 22.3% 5. Professional, scientific, and technical services: up 18.5%