Starting with no money and buying an existing business

Q. I am rather new to this area, and as I have always worked for big corporations, I am very new to small business. I presently work at a business I would like to own. The owner has offered to sell me the franchise. I am very intrigued by the possibility of owning this business, but have zero experience from which to draw. I am 50 years old, in good health, willing to work hard and have very good credit (but no cash). My husband is very supportive of this idea and will be a very large presence in running this franchise. However, he is still years from retirement and generally puts 40 to 50 hours into his job weekly. Could you possibly direct me to the type of advisor that would be the most helpful? I don't know how viable an option this would be, and while I don't want to pass up an opportunity to increase our retirement nest egg, I don't want to jump into something that could become an albatross. I appreciate your time and input on this matter, and I look forward to hearing from you.

Wow, there is so much to cover in your question. Before proceeding, something you might want to consider is that working at a business does not necessarily make it the right business for you. There might be others that are easier to run and have higher profits. However, let's just assume you are really interested in acquiring this business.

When purchasing an existing business, it is critical that you ascertain why the owner is selling. The most obvious reason for selling a business is that it is not profitable. While other reasons do exist, this is frequently the case. Bear in mind, the mere fact that you work there can not be taken as an indication of its profitability. Before going any further, have an accountant review the books and make sure the numbers are correct. They will also be able to recommend a fair offering price.

One item that has me a little bit concerned is that you do not have any experience in running a small business. However, most franchisors provide training to ensure you have the requisite skills to be successful. Additionally, in order to protect their interests, the franchisor normally has to approve the sale.

A second concern is that you would have to finance the business using only debt. This is truly dangerous as you subject yourself to debt payments that the business may or may not be able to make. Your credit may be good now, but it could deteriorate quite rapidly. For most people, it is not advisable to start a business using only debt for financing. I would recommend that you seek out investors that would be willing to contribute some cash. This would be in your best interest as statistics have shown that businesses starting with $50,000 or more in cash do much better than those who start with less.

If you decide to go ahead with this acquisition, be prepared to spend long hours working at the business - especially in the beginning. With so much to learn and do, people normally put in 60 to 80 hours a week when starting a business. And, while it is great that your husband is supportive, it sounds as though you will not be able to rely on him for too much help as he is committed to another full-time job. This is not necessarily a bad thing, but it is better to recognize this fact at the beginning rather than at the end.

All things considered, I do not think it is a bad idea to buy an existing franchise. In fact, starting with an established business and an existing customer base are two significant advantages. You will simply need to find some great advisors to help you navigate these waters.

Good luck!