Buying a Service Business
You have decided to buy a business, but what type suits you?
There are 4 main types:
· Manufacturing
· Distribution
· Retail
· Services
Each has its own unique characteristics that may or may not suit your skills
and strengths. In this article we look at service businesses.
This is a popular, high growth area covering from the mowing of lawns to the
practicing of law. It's about working with people and providing them with
skills or expertise. It maybe; providing cleaning services, performing
dentistry, wiring a house, or doing consultancy work to mention but a few.
Usually services will focus on one of two categories;
(1) the domestic
market, or
(2) the business sector.
They employ a range of skills from the
professional to the semi-skilled, and can be operated out of a van, home, or
an upmarket city office.
The service industry relies on the selling of time and skills. You have to
like working with people and providing service. It pays to be good with
staff, be able to train, motivate and manage people. You will need to be
efficient at managing resources and at maximising chargeable time - this
will be key to your profitability. It also pays to be professional and good
at what you do.
Most service businesses don't need vast amounts of cash to get going, as
they don't usually require extensive plant or large buildings. They can be
sized to suit, from the owner/operator to the large corporate, and are
generally good providers of cash flow. Some areas tend to be more
competitive, especially at the lower skilled end of the domestic market
where price rather than service can become the focus. Good service
businesses are well sought after, often fetching good prices - unfortunately
most of this can be in goodwill (a risk you should seek to minimise). There
are a growing number of good service businesses now being franchised. Look
for good systems and a stable customer base. Determine if the business in a
growth or decline phase? What's the market like in the area you intend to
operate? If the business is highly profitable, then it is also likely the
vendor will be asking high goodwill. If this is the case, then you may wish
to make the goodwill subject to the business's ongoing performance.
Richard O'Brien (nzbizbuysell.co)
When purchasing any business always seek professional advice.
For further details, visit www.nzbizbuysell.co.nz
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