Starting Versus Buying a Business

John’s Johns John’s dad owns his own plumbing company. John is considering becoming a partner with his dad and eventually buying the business from him. What do you feel are the advantages/disadvantages of working for family? What would you want to know about the business before you bought it?

Choose Your Values Adventure Balance Commitment Community Compassion Competition Courage Creativity Environmentalism Fairness Financial Security Fun Generosity Hard Work Health Honesty Independence Integrity Kindness Knowledge Learning Loyalty Physical appearance Power Recognition Relationships Responsibility Security Social responsibility Solitude Spirituality Tolerance Values: define who you are, shape your attitudes and your choices, and help you identify your priorities. These are usually influenced by family, religious beliefs, teachers, friends, society, and personal experiences. Core values: beliefs and principles you choose to live by. They do not change in different situations and they endure over time. *Activity: From this list, choose ten values that matter to you. Ask yourself, who or what has been the greatest influence on your values? Allow students five minutes. Share when finished.

Buying an Existing Business Why buy an existing business? Advantages Less risky—financials available Employees are hired/trained—training may be provided Customers are established Loyalty (goodwill) Established procedures Disadvantages For sale because they are not making a profit. Serious problems may be inherited. Capital is required.

Family Business Smaller enterprises Grew up with the business 1/3 survive to the second generation Some families work well together; others do not

Advantage/Disadvantage of Family Businesses Trust/togetherness that members share Pride Business remains in family Enjoy working with relatives Disadvantage Can never “get away” from the business Management positions held by family members regardless of ability Difficult to retain good employees Family politics Separation of family and business life difficult What if no family member wants to continue the business? Advantage: A family working as a team can often achieve more than its individual members alone. Disadvantage: Have difficulty viewing the venture and its problems objectively. Parents sometimes are unable to see their child as a business person capable of making wise decisions and taking responsibility. What’s Important? Establish clear lines of responsibility Be objective about family members’ qualifications Keep decisions unaffected by personal emotions Respect individual family members’ needs

Evaluating an Opportunity What would you do to find out information about a business you were considering to buy? Would you trust what the seller was telling you? What actions would you take to find out if the business was worth buying? Visit during business hours to observe the company in action. Ask the owner to provide you with a complete financial accounting of operations for at least the past three years Get expert help to determine a price to offer for the business

Evaluating a Business Opportunity Investigate company/industry Hire an accountant Hire an attorney Hire a business broker Similar to a real estate agent Point #1: Don’t rely on what the seller tells you. Talk to customers, employees and suppliers. Point #2: He/she will verify the value of the business’s inventory, accounts receivable and assets. Point #3: He/she will advise you and investigate the business for any legal liabilities. Point #4: Their job is to bring buyers and sellers together.

Assignment Research an existing business for sale. Choose a business to buy Explain why you chose that business Explain which type of organization you would choose: sole proprietorship or partnership Explain whether or not you would engage in the business with family