Crawl and Walk Before You Run
by James Nakashima, CPA, CA, CBV
My wife and I have two kids: a three-year-old daughter, and our son is a year-and-a-half. Watching them grow up has been an eye-opening experience, especially seeing how different they are. For example, our daughter didn’t walk until she was almost 17 months old. Our son, on the other hand, started walking at just over a year old. Now the little bugger won’t stay still, but that’s another story. I think having an older sister gave my son a head start – he watches and copies her constantly, even to this day.
In many ways, it’s similar to buying a business. One of the big reasons to consider buying an established business, compared to starting your own, is that an existing business can give you a head start. The business will already have contacts, employees, reputation, systems, and a location.
It’s important to understand that the head start can give you a huge advantage, but you cannot presume to skip all the learning that has to happen before you take over. My son didn’t wake up one day and suddenly know how to walk. He crawled along for a while, then did the shuffle using the couch or wall for help, and then figured out how to walk. Similarly, buying a business may get you running sooner, but you must take the time to learn how to crawl and walk before you can you really run it. A transition period where the seller spends some time with the buyer to teach them about the business is typical – as a buyer, this should be non-negotiable unless you absolutely certain you know what you are doing.
The head start can be a huge benefit, but clearly it comes at a cost – it’s included in the price you pay for the business. The tough part is figuring out what those benefits are worth. A Chartered Business Valuator can help – we specialize in valuing those intangible assets that may help the buyer on the road to success.
Now I am just hoping my son figures out the potty training thing just as quickly as he figured out walking. The other day, he went in the bathroom, flipped up the lid on our daughter’s potty, sat down, and said proudly, “POTTY!” so maybe soon, we can stop giving money to Pampers.
Photo Credit: StandOut Photography