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Is The True 100% Absentee Owner Business a Myth?

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Comments & Replies: 3     Views: 2932     Posted By: Business Broker  



Topics: Buying A Business     Tags: absentee run, buying a business, for sale by owner



For years people have told me they want a semi absentee or full absentee ownership business. As stated by Craig, this idea is really a myth for main street businesses. Main street businesses are for the most part doing less than $5 Million in annual sales and have a profit of less than $1 Million per year. You can find businesses that are being run by educated, and experienced managers in slightly larger businesses with salaries over $100,000 per year. The more qualified the manager the higher his wages and benefits are. One of the reasons that main street businesses sell for such low multiples of profit compared to middle market businesses is that middle market business have layers of management, which protects the company from the loss of a key employee. Small companies, are in big trouble when they lose their manager who is usually the owner. The other comment I want to make is regarding what an owner who is not working behind the counter of his business should be doing with his time. He or she should be doing website work such as blogs, pay per click, and press releases. Sending out flyers to the neighborhood and letters to existing and prior clients also needs to be done. Marketing, promotion and advertising is what an owner must be doing continually, regardless if he is full time, part time or no time. To neglect doing this is a sure fire way to make your business smaller.


I couldn't agree more.

Often I encounter potential buyers who are looking for a "cash cow" with little or no effort on their part to invest time into the business. -- The proper investment for them is the stock market (or, maybe, very passive real estate), not a small business.

Never have I seen a truly "absentee ownership" operation in the small business marketplace. While one may find a "4-hour work week" SEMI-absentee business, even those require more time and talent from a new owner than is often apparent to the prospective buyer.

So, Mr./Ms. Buyer, when you see "absentee ownership" in an ad, be wary and be skeptical.... and do extensive detailed due diligence inspections. You might find a rare gem, but you are most likely to find a lead sinker.


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