If the business you’re about start or buy was a car, would your mechanic let you buy it?
Written by Peter Beckett
I’m obviously an Accountant by profession. This means that I spend the majority of my working days helping small business owners run, manage and understand their businesses.
Some business owners run good businesses, some run poor ones.
The reality is that many people in our country look at either buying or starting a small business during their working lives.
During the recent banking royal commission, and all the hoo-ha we’ve heard from small business owners claiming negligence against their banks, it got me thinking.
You see, I am about to start looking for a car for my 16 year old daughter. Being her first car, I’m not too fussed if it has the odd scrape or whether there are a few km’s on the clock. All I need is something safe, reliable, and don’t particularly want to spend more than $5-6k.
Over the years I’ve learnt that cars come in many shapes, forms and differing levels of quality. Just like small businesses, some are good; some are ‘lemons’.
I’ve also learnt that mechanics is not my strong suit so once I find something that meets the criteria above, I’ll ask my mechanic (who just so happens to be a client) to check it over before I buy it – fairly standard practice I’d imagine!
History tells me that this will cost anywhere between $100-$140, or let’s say roughly 2% of the purchase price. Considering it’s my daughter’s safety on the line, quite reasonable I think!
How does this relate to the banking royal commission you may ask?
Day after day, article after article, small business owners have been crying poor, revealing a plethora of dramas associated with the financing of their business, and claiming that the banks were negligent in doing so.
Now don’t get me wrong, banks can be negligent. I’m definitely not disputing that! But during this time I haven’t seen or read anything where a small business owner has stood back, put their hands up and said; “Nup, the banks have thrown money at me, I took it, I now wish I hadn’t, but I didn’t know the numbers or do the diligence beforehand.”
All too often it’s easier to blame someone else, than to question why you’re really in the situation you’re in.
In saying that, I would love to ask these small business owners the following 2 questions:
- Before jumping into business, did they engage a professional/s to advise and guide them?
- If so, did they act on the advice?
I just don’t understand how some of the reported situations could have occurred if the answer to my 2 questions is YES.
Would it be reasonable then, following on from my car purchase analogy, to invest some time and money in engaging an expert when buying or establishing a business, especially when you’re borrowing money to do so?
After all, as a business advisor I spend my days working with small businesses; Hell, I’m even a small business owner myself. Good chance, that in the hour or so it takes me to review your proposed business, I’ll be able to pick up some things that you might have missed.
All I can say is thank goodness I trust my mechanic to steer me away from buying a lemon!
Meet Peter & Sandy, owners & directors of Red Hill Garden Centre:
“When we bought Red Hill Garden Centre back in 2014, the staff at LBW Advisory were fantastic. They highlighted issues with the existing business, and made us think of things that we would not have otherwise considered. We couldn’t have been happier with the assistance we got during the process and the continued support almost 4 years on!”