Home' Trinidad and Tobago Guardian : March 9th 2017 Contents MARCH 9 • 2017 guardian.co.tt BUSINESS GUARDIAN
ENTREPRENOMICS | BG19
Buying a small business
Back in 1886, John Stith Pem-
cocted a beverage from coca
leaves, kola nuts, tea leaves,
sugar and a little alcohol in his
laboratory. His drink was not an
instant hit, but he saw the potential in it. His
first year's sales were US$50 but his market-
ing expenses were high, so he approached Asa
Griggers Candler, who agreed to buy shares for
US$1,200. Pemberton later died of cancer and
Candler bought the remaining shares of the
business for US$2,300. From its humble be-
ginning, this company developed into a leading
soft drink company. The Coca Cola company
sales for fiscal 2015 was US$44.3 billion and
had net income of US$7.3 billion. Candler, it
seems made a great investment by buying an
One of the beauty of entrepreneurship is it
offers what many fields don't. You can pursue
your dreams and be rewarded handsomely for
it, as Candler did.
Who would have thought a product con-
cocted in a rickety lab would change the world
and create a whole new category of soft drink?
You can generate unlimited income and achieve
financial freedom compared to a desk job, if
you tried your hand at entrepreneurship. You
also get the chance to be your own boss and
say goodbye to cubicle life, which has a way of
cramping your style-your creativity and doing
the things you enjoy. You rather a fun-work
hybrid personal life model.
Sometimes you wonder if there is another
way to enter into business ownership other
than starting it on your own. Well there is a
way, it's called acquisition entrepreneurship;
buying an existing business.
Richard Ruback and Royce Yudkoff, both
professors at Harvard Business School, coined
Acquisition entrepreneurship offers many
advantages over starting a business from
scratch: you get away from the risks of a start-
up and the long and hard hours attached to an
early stage operation. But you must take note
of a couple things if you are to launch into this
fast track route to entrepreneurship. This is
not Betty Crocker style entrepreneurship, you
must add some ingredients to make a success-
ful recipe for business success.
There are a couple of points you need to know
before you fork out your hard-earned cash to
purchase an existing operation.
First you need to start with yourself. Can
you make the entrepreneurial transition?
You no longer have a boss, so you need to get
comfortable with making decisions and taking
responsibility for it.
Also, remember entrepreneurship is not just
owning an enterprise but using creative and
innovative ways, better processes to create
value added solutions that customers prefer.
You might be a single parent who want to
spend more time with your children or have
an ailing parent to support.
While entrepreneurship offers flexible
working hours, it does not mean you can run
a business on autopilot.
You must recognise you are taking an existing
venture, while operating at a certain level, to
a higher performance target.
While there are many good businesses out
there for sale, some may not be a good fit with
your personal preferences. If you are an ACCA
trained accountant, you might want a business
that can use your accounting and financial
background. So, you might be on the lookout
for someone who has an accounting practice for
sale or a franchise holder that is selling wealth
The process of finding a business-for-sale is
quite challenging. First, we do not have busi-
ness brokers (people who sell businesses) or
they might be under the radar or some profes-
sionals (real estate agents) may do it on an ad
hoc basis. It would have been nice to just walk
into a broker's office and look at her inventory
of businesses and then proceed to cut a deal.
Therefore, you should be prepared for a long
and time consuming process. One place to start
is the classified section in the newspapers un-
der "business for sale" category. Sometimes
real estate agents do get a business that is tied
up with real estate and they might be in a quan-
dary as what to do.
Agents are trained in selling property, but
they might be happy to offload the business
part. They may also have been approached by
entrepreneurs who want to sell and they can
therefore become a good source of leads.
Accountants may be good professionals to
turn to as are lawyers who might be involved
in court matters that involve a business to be
broken up or sold.
Of course, you can take out ads indicating
your desire to buy a business. This might work.
Or you can ask your chamber if they know of
any members who might be retiring. With the
rise of increased crime, some entrepreneurs
may consider opting out. I remember during
the early 2000s, the kidnapping rate was very
high and many business owners were willing
to sell and migrate.
Trinidad lost some experienced entrepre-
neurs and capital left with them; brain and
money down the drain.
Finding that fit
When you have found your "prospective"
business, consider it more like a suspect (keep-
ing in mind the spirit of crime situation). There
are two major questions that the seller must
1.Why is the business for sale? The reason
must be a sound one: wanting to retire,
sickness, planning to migrate or need to sell
to focus on another business and therefore
needs the capital. Of course, you need to dig
a lot deeper if the venture owner says he wants
to retire and he is in his 40s and has young
2.Can the seller justify the sale price?
This one is tricky as it calls into ques-
tion business valuation. The selling price for
Trinidad Cement Ltd is easy to calculate as it
is a publicly traded company and a prospective
buyer can offer a premium to pull in sharehold-
ers over the market price. Not so for a private
company. The value can be determined by its
earnings (or expected future earnings) and what
kind of risks the business carries.
Small- and medium-sized enterprises carry
a lot of risk and sometimes a change in man-
agement can mean loss of employees and cus-
tomers. There is also the risk that the accounts
may not reflect the true financial performance
of the venture.
After purchase the new owner may find the
organisation has more issues than the due dil-
igence process revealed.
One of my relatives bought an auto tinting
business, only to find out the business owed
taxes to the State. He had to pay off the taxes
at greater expense.
Not all buys are filled with challenges.
One of the first things a new owner wants
to do is call a meeting with his staff and give
them the assurances they need to be productive
and remain loyal. Then it is time to talk to your
customers and reassure them of your plans to
create value for them.
Remember, a large part of the price you
pay could be for intangible assets-knowledge
workers, supplier agreements, loyal customers,
so protect these as they are the easiest to lose
but have the greatest potential to earn share-
Sajjad Hamid is an SME & family business
adviser. His contacts are: entrepreneurtnt@
gmail.com and entrepreneurtnt.com
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