Small Business 101
July 25, 2012 11:24 AM   Subscribe

Today's fantasy: buying the small business my husband works for. Talk me through the steps like I'm a 5-year-old.

My husband & I are thinking of buying the small business he works for. He's worked there for 10 years. We're novices, have never owned a business and neither of us have a business background (though I'm a high-level communications person by trade). My husband is an expert in his field and is third-in-command at the business.

This is just a what-if idea right now. We wouldn't purchase for a few years. The owner is open and willing to sell. The business offers luxury items/services, but is in a prosperous area and has generally done well.

We're believers in research, working with people who do have backgrounds in this (including lawyers) and we're both realistic about finances and our time. Neither of us are married to this idea; we just think it's an interesting path to consider.

We have some capital to put into this and will have more in a few years. We're in our 30s with no kids (and don't plan to have kids.) We own our home, our cars and make about $100k combined. The business is in a wealthy suburb of Minneapolis, MN.

Metafilter, talk to me like I'm a 5-year-old here. What are my must-read/watch/heed small business 101 resources? Did you buy a small business? What do you wish you'd known? If I have two years to really do this right, what should I focus on and when?

What obstacles will I face? (While I appreciate that there will be the "don't do this, are you kidding" answers, I'm not looking to be waved away right now as this is just a fantasy at this point. I am, however, interested in obstacles and proposed solutions.)

Trust I'll be reading everything I can get my hands on, but I'm interested in anecdotes, tips and advice from my favorite community. I'm truly a novice (and so is my husband), so be gentle. Thanks!

(This question has been helpful, but I'm looking for more concrete resources and steps, especially with buying a business vs. starting a new one.)
posted by Laura Macbeth to Work & Money (3 answers total) 5 users marked this as a favorite
One of the most important factors in the success or failure of a business that you purchase is the price that you pay. If you overpay compared to the income that the business generates, it is unlikely that you can succeed. You should talk to an accountant that is familiar with small businesses that can help you with the proper evaluation. This means analyzing the purchase price, how it is financed (either cash or borrowing), compared to the net income you can reasonably expect. This will require that the accountant have full access to the books for the company you are considering buying.
posted by JackFlash at 11:37 AM on July 25, 2012 [2 favorites]

You might want to check out the services offered by the Small Business Administration-- especially the counseling & training services. SCORE is a volunteer organization of retired executives that work with small business owners -- they have three offices in Minneapolis. There are also Small Business Development Centers that provide training and counseling for free.

I agree with JackFlash that proper valuation and income statement projections are important. I think it is worthwhile taking some classes online or at your local community college to learn how to do this yourself and do some sensitivity analyses or "what if" scenarios on your projected income and cash flow statements.
posted by elmay at 12:47 PM on July 25, 2012

Response by poster: Thanks, everyone! I know where to start now.
posted by Laura Macbeth at 9:35 AM on August 1, 2012

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