Is Buying A Service Based Business A Good Choice These Days?

Comments & Replies: 2     Views: 29634     Posted By: Christina Lazuric  Christina Lazuric: Business Broker - Orange County

I've been selling small businesses a long time and I get many call from business buyers who are open to buying something but aren't sure what would be a good investment. I'll get asked what I would buy if I was them and my answer is always the same, "a service-based business". I explain why here.

Topics: Buying A Business     Tags: buying a business



I've been selling businesses a long time and I get many call from buyers who are open to buying something but aren't sure what would be a good investment. I'll get asked what I would buy if I was them and my answer is always the same, "a service-based business".

There are plenty of reasons for my choice but the most compelling is my aversion to risk. While its true that service businesses typically come with fewer assets than the average business I say, who cares. Maybe it makes some people feel better to walk into a business that has office equipment, machines, people doing things with the machines. I just see liability. Over the course of my professional life I have seen business equipment sell for pennies on the dollar, so I feel that if you're thinking that these assets are going to save you in a worst-case scenario then think again, that's a false sense of security. Capital equipment is a different story, but few businesses come with equipment values over a few hundred thousand dollars.

I believe in pure cash flow without the drain of appendages. When I first got into business brokering I couldn't give a virtual business away now 13 years later, I just closed a sale of a 6-million-dollar business that came with 2 laptops. Service can even be retail if you aren't responsible for a lease of space, furnishings inside, employees to run it, and sitting on inventory, thank you Amazon. The less responsibility the business has to bear the better it is. Also, the more flexible a business can be the better it is. Businesses try to control sales by doing their part, marketing sales calls etc. What about the unforeseen market circumstances that no one saw coming that have a real affect on some businesses? In a service business that doesn't have an expensive monthly lease or many W2 employees to feed, you can streamline to adjust for the change but if you're trapped in many fixed monthly expenses then you won't weather a long drought.

A service business isn't for everyone of course. If you're a machinist, then you are a machinist and that's not virtual unless you contract another machinist to do all your work for you. The point is that we need some businesses to have a storefront and warehouse, that's just how they operate. If you have a choice though and you're thinking about it, just focus on the highest cash flow and least liability.


Aside from poor management, one of the ways most businesses fail is insufficient capital, because they either misjudge how much their sales will be or they spend to much building the business with investments in equipment or splurge too much on tenant improvements. Many business owners will overestimate their sales and underestimate how long it will take to get the business off the ground, and end up having a failure on their hands. A "service-based business" is good, but like with any business, and in any industry, I recommend to my clients to view each business on a case-by-case basis and not just be following a trend - they should always look and analyze the numbers, and be conservative with what future sales will be and mind their expenses, so they don't end up running too low on capital.


  Helpful Resources To Assist In Selling And Buying California Businesses
Diane Boudreau-Tschetter: Escrow & Bulk Sale Services In California

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

Helen Yoo at New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Lee Petsas, Business Broker: Southern California Area

Lee Petsas has been selling businesses with UBI Business Brokers in Southern CA since 1981. In 1999 he became the Owner and Broker for UBI. He has been approved multiple times by Courts as an Expert Witness in the area of Business Valuations.

Steve Erlinger: Laundry Broker, Consultant - Southern California

I specialize in the laundry industry broker and consultant in Southern California. I assist buyers navigate the many facets of finding, evaluating, and operating a laundry business. I also help current laundry owners find additional stores, sell, evaluate an existing laundromat. Call 949-500-5893.

Steve Zimmerman: Restaurant Broker Specialist, California

Steve founded Restaurant Realty in 1996. He has personally sold/leased over 1000 restaurants, bars & clubs, & completed over 3000 valuations. The author of "Restaurant Dealmaker- An Insider's Trade Secrets For Buying a Restaurant, Bar or Club" available on Amazon. Reach Steve direct at 415-945-9701.

Chris Seaman, Business Broker: Southern California

Founded in 1994, First Choice Business Brokers has accelerated to become one of the most successful Business Sales Organizations in the world. Our team of agents have gone through extensive training to become experts in the field of business brokerage. Call Chris at 858-578-4111 for more info.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
Selling My Business: How Many Business Brokers, Agents Should I Interview?

Choosing a business broker to sell your business can be crucial to the success of it selling. A broker who you have an exclusive listing agreement with, which I recommend vs. open listing, will essentially be your partner during the listing term in getting your business sold. Joe Ranieri explains.

Purchase A Small Business With Limited Or No Cash: Financing Tips For Buyers

Purchasing a business with no money down can be difficult, but not impossible. Financing a business purchase or down payment can often be accomplished with these strategies offered from Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program Advisor with BizBen) in this post.

Thinking About Selling A Small Business? Know These 8 Factors That Matter

The likelihood of selling a business is often determined by external factors in the marketplace. Here are 8 influences on how easy, or difficult it might be when selling a small California business. Peter Siegel, MBA at 925-785-3118 (BizBen ProSell Program) explains these factors for owner/sellers.

BizBen Podcast & Webinar: Business Purchase Financing And SBA Loan Options

Ever wonder what is involved in obtaining business purchase financing to buy a business or franchise? Peter Siegel, MBA who has over 25 years advising on all types of financing for business buyers in this BizBen Podcast & Webinar - SBA loans, Non-SBA Financing, Alternative Financing Sources.

Should You Pay Your Business Broker An Upfront Fee To Sell Your Business?

Are up front fees worth it? In this BizBen Blog post Brian Loring (Business Broker) discusses the pros and cons of owners of small businesses paying business brokers and agents an upfront fee for their services. There are many sides and opinions expressed on this topic by both sellers & brokers!

What Steps Do I Take When Closing A Business That Doesn't Sell And I Close?

Every business broker knows that a listing taken is not a listing sold, in fact the ratio of listed vs. sold could be discouraging if you really thought about it. Joe Ranieri (Orange County Business Broker) discusses what you should do if you finally have to close the doors and call it quits.

Going Behind A Brokers Back: How Does A Broker Protect Themself?

What are some ways a broker can prevent a buyer and seller from doing a deal behind their back and what to do about it if it happens? Joe Ranieri (Orange County Business Broker) discusses ways a business broker or agent can protect themselves from buyers and sellers trying to circumvent them.

What Are The Pros And Cons Of Selling A Business For Sale By Owner?

What are the Pros & Cons of selling a business yourself? Joe Ranieri (Orange County Business Broker at 714-292-5448) discusses all the angles of business owners taking the initiative and selling their own business. He covers: commissions, flexibility factors, control, exposure, and confidentiality.


Escrow Services From Helen Yoo New Century Escrow
Escrow Town And Country Southern California
Bill Ziprick Legal Advise
Escrow Services Diane Boudreau-Tschetter
Facebook
Twitter
Linkedin
Vlogs and Podcasts
Instant Email Alerts On BizBen
BizBen ProBuy Program
BizBen Blogs And Articles
BizBen ProSell Program
Advertise On BizBen


BizBen - Where California Deals Get Done! 888-212-4747
7172 Regional Street #364 Dublin, CA 94568 © 1994 - 2021, All Rights Reserved


New Info Daily:   Facebook   Twitter   Linkedin   Vlogs and Podcasts



500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
Top 100 List: This Week's Top Motivated Business Buyers And Their Reques...
Read More News
Business Purchase Financing Expert Peter Siegel - Tips On Proving Cash F...
Read More News