Why ask why when buying a business?
Why are you buying a business?
There’s no wrong answer but understanding YOUR answer matters!
In some circles, the word ‘why’ is avoided and there are some good reasons for that. It can be off-putting and tends to put us on the defensive as we try to rationalize our position on a subject.
- “Why did you do that?”
- “Why is that important?”
So, it makes sense that “Why are you buying a business?” might immediately make us uncomfortable.
Answering this question isn’t about justification or defense.
It isn’t about defending your position.It isn’t even about answering someone else who might pose the question to you.
It’s all about you and understanding what’s driving you to take the entrepreneurial leap.
Why ask Why?
Why ask why you’re buying a business or thinking about it?
Isn’t it obvious?
Well, Is it?
It’s probably less obvious than you think and more important.
Unless you’re a professional investor, the reasons for buying a business go quickly from objective to decidedly personal.
I want to mention here that being able to explain why you want to buy a business to yourself isn’t about proving it’s a good idea or giving you a reason to doubt yourself. There are plenty of places where you’ll confront issues like that but if you can get clear about the three things below you’ll have the foundation you need to answer the question for others who might ask.
Enough preamble, here are three reasons you should get clear on your ‘why’ before you buy a business.
Getting Out of Bed
“Entrepreneurship is…” Ask a room full of entrepreneurs and you’ll probably get a room full of answers.
For me, entrepreneurship is about being able to build a business that aligns closely with my values, interests, and skill set. That means helping business owners get the best value from their business and finding ways to help those same owners stay in operation for the long term. We lose 50 percent of our businesses every five years and, to me, that’s too many.
It has also meant long days, weeks, months, years. It has meant making heartbreaking decisions about business and about employees.
The entrepreneurial journey will challenge you for every bit of the reward that you hope to get.
Let’s face it, that reward is never guaranteed.
When you start looking at buying a business, you’re going to want to deeply connect with what you’re doing and the business you’re buying because there will be times when just getting out of bed to go to work is going to make you feel like Atlas.
Finding the Fit
Find a business that fits your interests, experience, and abilities. This isn’t so that you’ll be happy doing the work. Rather, it’s so that you’ll understand the business; know the customers and markets and be able to recognize both problems and opportunities.
Fit is fundamental to why.
What kind of impact will you have?
How will you improve the lives of your customers?
How will you change the business to create value (I call this your Personal Value Creation Engine)?
What opportunities does your experience allow you to see for the business?
When we look at value generation it’s important to keep what you can offer the business at the forefront of your mind rather than what benefits the business will offer you in the short term.
That’s the point of a good fit.
Once you agree to begin the process of buying a business the literal or figurative horse-trading will begin. This is the crucial time when you establish and focus on the value you place on the business. Buying a business isn’t about the mathematical value of a business. The standardized valuation methods that are used will get you a starting point but what a business is worth is what you are willing to offer that the seller is willing to accept.
With a clear understanding of why this business is a good match, you will enter the negotiation with a clear set of boundaries that will allow you to say yes with confidence and, if needed, to comfortably say no with the same confidence.
The Bottom Line
Clarifying why you want to buy a business is about more than justifying it to friends and family (or even yourself). Taking the time to go through this exercise allows you to find the best fit for your personal value creation engine. That fit will provide you with motivation when it feels like you’ve taken on more than you can handle (you haven’t!). Finally, you’ll position yourself for a strong, authentic negotiation where you’ll walk away winning regardless of whether or not the deal is completed.