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Buying a New Lifestyle

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How about a quaint bookstore in a small village? Or maybe a lovely country inn nestled in the mountains? Perhaps a travel agency - with all those great trips - might sound appealing. 

Buying a business, no matter what it is, is also buying a lifestyle. What better time to make a lifestyle change than when one is considering the purchase of a business? If you want to move to the mountains, a small town or even right into the middle of the city--you can do it when you buy a business.

Most buyers of businesses, when asked why they want to buy a business or go into business for themselves, state that they want to control their own destiny or don't want to work for anyone else. Making more money is far down the list.

In fact, most buyers who have left the more lucrative corporate world claim that they would never go back to it. Although most buyers would probably not admit it, the decision to buy a business is primarily a lifestyle choice.

In this context, the type of business or the geographical place is immaterial - it's the switch from job-holder to business owner that is the dramatic change. Just giving up the "frequent flyer" out-of town trips and the constant meetings may be a lifestyle change for many. One buyer said that he saved 1,000 hours a year by adding up the cost of commuting and time spent in meetings. For many new business owners, the lifestyle change becomes more important than money.

Sellers of businesses should keep in mind, however, that a lifestyle business is determined by the buyer - not the seller. It is the buyer's perception that gives a business its "lifestyle" quality. No matter how quaint your bookstore may be, buyers are not going to overlook the basics they expect to find before even thinking about the style of life it might provide. Buyers are still going to look at:

  • Is there enough cash flow to cover the debt service?
  • Is there also enough to pay a reasonable salary to the owner?
  • Is there some left over to provide a fair return on assets and the buyer's investment?

Furthermore, there are other considerations. Some typical lifestyle businesses - the country inn or bed and breakfast, for instance - may be real estate driven. That is, the real estate contains the real value of the business; the real profit lies in the equity in the real estate and its possible appreciation.

Therefore, in considering these types of businesses, the buyer may be willing to overlook some of the items listed above. The lifestyle decision may outweigh the normal return a prospective buyer expects of a business. There are those who are willing to make less money or overpay for some lifestyle businesses.

Obviously, it could be said that every business offers a lifestyle opportunity for someone. However, only those businesses where there is sufficient buyer interest can qualify as those lifestyle businesses for which buyers are willing to accept lower returns or even to overpay. Again, sellers would do well to remember that lifestyle is in the "eyes of the beholder."

Copyright 2007 Business Brokerage Press
 


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