10 Faqs To Know When Buying A Colorado Services Business

Services Businesses are a category of businesses that span a wide variety of ventures from auto repair services or pet care and grooming companies to fitness centers and travel agencies.

We are all keenly aware that the U.S. economy is moving away from its historical manufacturing base to a more service-type economy. This has not been good news for the areas that were built on and provided manufacturing jobs.

However, when searching any of the online business MLS sites, today's business purchasers are presented with the greatest choice of potential businesses to acquire in the services business category.

The skill set needed to be successful with a services business is generally more generic than the skill set needed for a manufacturing business, for example.

Below are 10 Frequently Asked Questions containing key factors that any future business owner should consider before purchasing a services business. These include:

- Make sure that the business fits your strengths and preferences. Ask yourself, are you more comfortable dealing directly with consumers or businesses? Are you more comfortable with offering an intangible or tangible type of product or service for sale?

- What are you really buying? Is there some element of exclusivity, brand recognition or product differentiation to the product or service in the target market?

- What can you do to build the business? Can you add additional products and services and then sell them to the existing customer base or can you expand the geography or industries served?

- During the due diligence phase be certain to investigate the suppliers, customers, and contracts in place, in addition to the financials of the business.

- What are the competitive dynamics of the market? Is there an 800 Pound Gorilla in the business meaning a huge competitor who can ultimately impact your business?

- How easily can a competitor enter into the business? What are the barriers to entry if any? How easily can any employees quit and become your competitor? Is the Seller willing to sign a non-compete clause?

- Can you obtain financing? In this category, there will typically be less hard assets such as machinery and equipment to use as collateral. Is the Seller willing to provide financing?

- Investigate whether there are customer relationship and/or concentration issues. You will want to be sure (and have some protection in the deal terms) that a smooth transition of these relationships will occur after the sale.

- Allow yourself enough of a transition and training period with the seller.

- After you take over, consider not making any drastic changes until you are totally comfortable with the peculiarities of the business.

A services business will usually generate higher than average profit margins compared to other businesses and can provide entrepreneurial business owners with an excellent platform to grow. Touchstone can help you locate and buy a services business that makes sense for you!