Is buying an already existimg bussiness a good investment?

[JovenCansao]

Someone is selling let's say a fish store, they do all the process to sell dried fish and such

The owner is selling because his health is decaying and is no longer able to manage it so he is selling the whole business, employees, clients, providers, etc. The business is going steady and has gone for years.

Would you say it's a good move to buy it and manage it yourself even if you know shit about the business model or the fish world? And even more important you don't really want to manage the store for a living or have other goals in mind.

 

[Psychophilly]

Buying already existing businesses is the best investment that there is, look at big companies and giga rich people. they dont start up new business they just buy already successful businesses

 

[Octavian_Augustus]

Depends on multiple factors such as the business model, valuation, industry etc so no one size fits all answer.

Let's take your example.

If you want to make a good investment in a dried fish store you need to first of all make sure you don't overpay. You want a reasonable valuation based on a financial metric such as the business' bottom line. If you pay 50k for a business that generates 10k in profit each year you take 5 years to recuperate that investment and get upside thereafter. If you need to take out debt to make the purchase you need to find favorable terms that won't burden your business with heavy interest payments that could bankrupt you. So step one is making sure the valuation and financing are reasonable for your return goals and for the business' liquidity.

Then you want to know the space well if you are going to manage the business in order to retain the trust of your employees, clients, providers and make good managerial moves. If you don't know what you are doing you could tank your brand and revenue by pissing off clients, suppliers, employees, even food and safety regulators. You could also mismanage your company and create inefficiencies that raise your cost and cut into your bottom line.

If you delegate the business to a professional manager then you need to make sure the business can accomodate that expense as that will inevitably cut into your bottom line. A dried fish store probably doesn't have good margins (retail has cut throat margins) due to cost of goods sold, the overhead of managing inventory and a physical location, as well as the brutal competition with large retailers like Walmart that use scale to compete on price. Only chance really is to offer a unique and differentiated product that attracts people from other large stores that offer dried fish at a lower price.

Overall unless you are a savvy businessman who knows the space he is entering and sees an undetected, undervalued niche where he can create a strong brand, competitive moats, and scale efficiencies I'd say you can generate better returns for yourself in other investments.

 

[AlexBrown84]

Yea just make sure you have knowledge in said field, have a partner with field experience, or have the previous owner teach you

 

[PURE ARYAN GENETICS]

yeah just make sure the industry isn't trending down jfl