We’re all familiar with the old adage, “You don’t know until you try.” It’s the argument that parents around the world make every evening at dinner to convince their children they’ll like those oddly shaped green things on their plates. And it’s what we tell ourselves when we’re working up the courage to take a risk, like finally ordering The Dirty Shirley (worth it) or sinking a bunch of funds into Voyager (big whoops).
When it comes to buying a business, it’s usually recommended you look within the industries you’re familiar with. Logically and logistically, this makes perfect sense. You already know the ins and outs of operations, what the markets look like, the challenges, the trends, the competition, and so on. Overall, it tends to be a smoother transition.
But what if you find a really sweet deal on a business you know nothing about? What if you’re bored with running a laundromat when what you really want to do is buy a food truck? What if you’ve hated math ever since the third grade but still ended up as an unhappy accountant who dreams of running a successful e-commerce site?
Listen, there are no rules when it comes to what you can or can’t do with your own life. (Mostly, anyway.) And you don’t know until you try. So why not try?
Now that we’ve hyped you up a bit let’s temper it with some practical guidance. Obviously, acquiring a business is a big, potentially life-changing event and should be treated as such. It’s not a decision or agreement you should enter into lightly. So if you find yourself ready to buy in an industry that’s new to you, here are six pieces of advice to keep in mind along the way.
It’s OK if You Don’t Know the Market
One of the biggest disadvantages of entering a new industry is that you don’t know the market. This means you’ll be spending a lot more time researching, studying trends, analyzing data, and assessing industry behavior. This can be a time-consuming process but not impossible. On the plus side, as an industry outsider, you can approach this with fresh eyes and a new perspective because you’re not coming into it with preconceived notions of what it “should” look like.
Compare, Compare, Compare
This is a bit of advice we mention ad nauseam, but for good reason. Accurate evaluation is only possible when it’s compared to something else. As we mentioned above, having a fresh-eyed perspective is great, but it can be a natural disadvantage because you won’t have anything to compare it to. If you’re an industry newbie, spend extra time comparing and contrasting with similar businesses. Leaving the world of retail with a 2% profit margin to acquire an accounting firm that boats 8% might look enticing. Until you realize the national average is closer to 18%, so clearly, something’s not adding up. (No pun intended.)
Experience is Experience
Don’t let the fact that you’ve not worked in a particular industry dissuade you. While industry-specific experience is obviously a bonus, you shouldn’t discount the specific brand of expertise you bring to the table. You may have spent the last ten years in the restaurant business, and now you want to purchase a tire service center. They seem very different on the surface, but apart from better hours and (probably) better margins, there are a lot of similarities. Both require good customer service skills, hiring and firing employees, managing inventory, and working with vendors. Identify your strengths and experience and use that to your advantage.
Don’t Be Afraid to Ask for Help
The entrepreneurial spirit is an admirable quality, but it also tends to create the expectation that you must do everything on your own. Not true. Investment banker, financier, activist, author of Start-Up Saboteurs and Economic Warfare, and the president and CEO of Blackhawk Partners Inc, Ziad K. Abdelnour said, “Be strong enough to stand alone, smart enough to know when you need help, and brave enough to ask for it.” Consider getting a mentor or bringing on a co-owner who is an expert in the industry. Work in tandem and combine your fresh outlook with their seasoned experience.
Don’t Listen to Everyone
Along the lines of seeking the help of experts, keep in mind you are under no obligation to listen to any of them. Not all advice is good advice; even the experts get things wrong now and again. Ultimately it’s your name on the paperwork, billboard, or business cards, and if shit hits the fan, it’s not going to matter that so-and-so advised you to do such-and-such. You still have to do your own due diligence. Don’t take everything at face value, and don’t be afraid to ask for competing advice.
Try Before You Buy
If you want some added reassurance that the business you wish to purchase will be a good fit, give it a trial run. Inquire if you can observe the day-to-day operations, get a tour, sit in on meetings, or even work alongside the employees. You could even consider taking on some part-time hours in an official capacity to really get a feel for the job.
Entering into a new industry can feel overwhelming and daunting…and exciting, all at the same time. (Life is funny that way.) It will be challenging, but it’s not impossible and can open up a whole new world of possibilities for you.