Buying a business, no matter the size or industry, is also buying a lifestyle. Most buyers of businesses, when asked why they want to buy a business or go into business for themselves, state that they want to control their own destiny or don’t want to work for anyone else. Making more money is far down the list. In fact, most buyers who have left the more lucrative corporate world claim that they would never go back to it. Although most buyers would probably not admit it, the decision to buy a business is primarily a lifestyle choice. In this context, the type of business or the geographical place is immaterial– it’s the switch from jobholder to business owner that is the dramatic change. Just giving up the “frequent flyer” out-of town trips and the constant meetings may be a lifestyle change for many. One buyer said that he saved 1000 hours a year by adding up the cost of commuting and time spent in meetings. For many new business owners, the lifestyle change becomes just as important as the money.
Sellers of businesses should keep in mind, however, that a lifestyle business is determined by the buyer– not the seller. It is the buyer’s perception that gives a business its “lifestyle” quality. No matter how quaint the bookstore may be or how intriguing the small manufacturer might be, buyers are not going to overlook the basics they expect to find before even thinking about the style of life it might provide. Buyers are still going to consider:
Is there enough cash flow to cover the debt service?
Is there also enough to pay a reasonable salary to the owner?
Is there some left over to provide a fair return on assets and the buyer’s investment?
Furthermore, there are other considerations. Some typical lifestyle businesses– a country inn or bed and breakfast, for instance –may be real estate driven. That is, the real estate contains the real value of the business; the real profit lies in the equity in the real estate and its possible appreciation. Therefore, in considering these types of businesses, the buyer may be willing to overlook some of the items listed above. The lifestyle decision may outweigh the normal return a prospective buyer expects when buying a business. There are those who are willing to make less money or overlook cash flow for the right lifestyle business.
Obviously, it could be said that every business offers a lifestyle opportunity for someone. Even unprofitable businesses are targeted for acquisition. However, most buyers wanting to acquire a new lifestyle and create their own destiny will be looking for a business that will enable them financially to enjoy their new lifestyle. Regardless of the operating performance, lifestyle is in the “eyes of the beholder” – the buyer.
-Bradley G. Marlor MBA, CBI is a Managing Partner at Utah Business Consultants and a Certified Business Intermediary. Utah Business Consultants is a full-service Business Brokerage and Valuation firm.