style="font-size:15px;"> 5 Is it profitable? Selling it for a fee is one thing. Making a profit is another. If it costs so much to make it that you can't make a profit, you need to find a cheaper way to make it or find a different business model.
If you don't want to lose money (like I nearly did) by making a poor decision, think carefully before you buy or launch a business. I didn't, and I nearly lost my entire life's savings. Fortunately, I was able to turn it around, but many can't, or don't, and what starts out as exciting can quickly become overwhelming or downright terrifying. Don't let this happen to you.
BEWARE OF UNWARRANTED OPTIMISM
Hope is not a marketing strategy. Neither is optimism, especially when it's unwarranted.
Knowing how to assess an opportunity is key, and doing your due diligence is the secret to getting that assessment right. Even if you're totally besotted with an opportunity, you need to look at it through an objective lens, and see if from all points of view, to see if the deal stacks up. Being prepared to walk away from it is also critical. It takes a lot of guts for the head to overrule the heart, but when it comes to buying and investing, there's no room for emotion.
For example, there's a coffee shop on a corner near me. It's the third coffee shop in two years to take a lease at that location. The previous two went out of business. From what I can see, this one will too because it's exactly the same as the two that went before it. The name is different, the décor is different and the people are different, but for all intents and purposes, it's a coffee shop just like the others. So, you have to ask the question: if the other two failed, why do these new owners think they will succeed?
I can tell you why: it's because the new owners have an unwarranted optimism about their likelihood of success — a misplaced sense of enthusiasm that, this time, it'll be different — because they think they are better operators, better coffee makers or just … better. I hope they are, but I doubt it.
This excitement at ‘what could be' obfuscates the reality of ‘what is'. They ignore the obvious warning signs about what could go wrong. In this case, the café has no atmosphere, no parking and no foot traffic. I hope for their sake this time something will be different.
The easiest way to determine what you should build, or buy, a business around is by asking these three questions:
What do I love doing?
Do people need it?
Will people pay for it?
Find the overlap in those three questions and you've found the business to pursue.
Summing up …
1 Don't count your chickens before they hatch.
2 Don't get cocky.
3 If someone says ‘no' to an investment, ask if they know of anyone who could be interested.
4 Get your accountant and lawyer to look over all contracts before you sign anything.
5 Don't confuse your passion for making something with your ability to sell it or market it.
6 Beware of unwarranted optimism. Do your due diligence before you buy a business or invest in one.
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