If You Want Different, You Have to Do Different

The other night, I went to the movies with my friend. It was just before Valentine’s Day and we were in the mood for the “chick flick” – some romantic comedy where we didn’t have to think too hard and just enjoy each other’s company. We chose “Marry Me” starring Jennifer Lopez and Owen Wilson. Jennifer Lopez’s character, Kat Valdez wants something “different”. Several times during the movie, she states, “If you want different, you have to do different.” I’m not sure where this quote originates, but a google search gives credit to Dr. Phil.

We don’t all have to take a leap of faith and marry a total stranger to get different results in our lives, but sometimes, we need to consider a path not taken.

Those of us who work for a living can make a choice. Do we work for someone else’s benefit, or work for our own benefit? We can be employees, independent contractors, self-employed individuals or business owners. Many of my friends who have taken the leap from being an employee to being a business owner say that one of the main reasons they won’t go back to working for someone else is that they want to be masters of their own fate: good or bad. For them, it is a sense of security. If you are a commission-based employee, you may have the ability to be master of your own destiny: as long as you play within the company’s rule book.

Do we work for someone else’s benefit, or work for our own benefit?

laura bechard – Provision business advisors

If that sounds like you, consider becoming an entrepreneur. What does “becoming an entrepreneur” look like?

There are different paths to take in order to achieve entrepreneur status:

You can start a business – full time or as a side hustle while you keep your day job.

Side hustles don’t often become a business capable of replacing your paycheque. Many side hustle entrepreneurs generate extra cash either to help pay the bills or for those little extras like vacations and larger shopping budgets.

Starting a business “from scratch” almost always takes longer than anyone anticipates. Just ask those entrepreneurs who depend on their spouse’s wage to support the family. When you quit your day job to launch your idea, your spouse likely uttered some version of, “Honey, I support you.” Did they realize that meant they would be supporting you and the family for as long as it takes?

• Is there an expectation that you’ll be contributing to the household again?
• Are you going deeper and deeper into debt to finance the operations of your big dream?
• Did you really think through the feasibility of the idea? Were your cash flows overly optimistic?
• Did you have a good advisor at your side?
• Did you avoid the hard questions that the bank would ask by “bootstrapping” and maxing out your credit cards, avoiding a business plan review?
• Did you write a feasible, realistic business plan or was it just wishful thinking?

On average, most start ups take 3 years to break even. Can you afford to not take a wage for 3 years? What changes would you need to make in your lifestyle today to be in a place where you could reduce your cash needs to put a roof over your head and eat? If you can reduce the cash you need personally, the business will have more cash to grow more quickly. Think investing in client acquisition (aka marketing). The faster you acquire clients, the quicker you will generate positive cash flows.

Starting a business means you start from zero: zero clients, zero systems, zero assets, zero brand, zero digital presence, zero advertising, zero staff, zero programs, etc.

“Becoming an entrepreneur”, can take a very long time, consume a lot of money and require a significant sacrifice of your personal life, interests, friends and family.

What could go wrong?

If the business fails to thrive, you could lose everything: your family, your money, your reputation and have long lasting effects on your mental health and your credit score.

Buy an Existing Business

Now you might think that you can’t buy a business. This could be for many reasons: no one you know has done this before, you don’t think you have enough cash, you don’t think you could finance the purchase, you don’t know how to buy a business, you don’t trust the sellers, or you don’t know where to start.

If you’re a newcomer to Canada on a path to immigration, you might be considering a business purchase to achieve permanent residency status. You likely have experience both from your country or origin and possibly Canadian experience too.

There is a huge upside to buying an existing business. For starters, you walk into a successful business: one that has customers, systems, maybe staff, and some products, programs or services that it is known for. You don’t start from zero!

Will it be exactly what you are looking for? Probably not.

Will it be successful enough that you can earn a living while you make it what you want? Probably.

Buying a business relieves you of the “start up pain”. Yes, this pain relief comes at a cost – generally called goodwill. A seller will be looking for a price that compensated them not only for the value of the assets you are buying such as inventory, equipment, real property, but also for the intangible assets you are buying: their systems and processes, their client list, their brand, their supplier relationships, their website SEO, their social media handles and followers, their google reviews, etc. They want a return on their sweat equity!

“Becoming an entrepreneur” take less time, still takes significant cash and may still require personal sacrifice. Depending on the state of the business purchased, the business may be “in good shape” and you can have harmony between work and life.

What could go wrong?

Many business buyers go into a deal without an advisor on their side. Remember that business brokers are paid by the seller and thus their loyalties lie with the seller. Buyers who are not business savvy can pay too much for a business or purchase a business that isn’t successful because they are not able to analyze the targeted business well enough to fully understand where there is value. They fail to include terms in the agreement that allow them to get a fuller picture of the business before the deal closes. Financial statements may mis-state the reality, especially where Compilation or Notice To Reader statements have been prepared. Some buyers benefit from the scrutiny of a lender where financing is required to close the deal. Where lenders are not involved (cash deals or vendor financing), there is an increased risk that the deal may be overvalued, and a buyer may pay too high a price.

There is no guarantee that buying an existing business will be successful for you. You may enjoy more success than the previous owner if you:

• make effective investments in the business
• can retain the clients & staff
• manage changes well
• have strong business acumen
• selected a good industry
• have a healthy economy

On the other hand, you may enjoy less success than the previous owner if you are:

• inexperienced in running a business
• impulsive and make bad decisions or implement changes ineffectively negatively impacting client and staff retention
• stepping into a bad economy
• buying into a declining industry

Some factors that impact your success are within your control and others are not. Legal or regulatory changes, new taxes, supplier cost increases, political changes, changing demographics and changing customer preferences can all have either positive or negative effects on your business. In some situations, it makes sense to have the previous owner stay on for a period of time to help smooth over the client and staff transitions.

If you’re wondering if business ownership is right for you, check out our short course for First Time Business Buyers. In only 12 hours, familiarize yourself with the factors at play if you wanted to make a business acquisition. Get educated!

Have a look at our FIrst Time Business Buyers Programs

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ProVision Business Advisors. For more information, contact Laura Bechard, CPA-CGA, MBA, M Ed, CEPA at (587)418-8865