Is it worth buying a business under $100,000?
Is it worth buying a business under $100,000?
Purchasing a business is a significant decision, especially when considering options under the $100,000 mark. It’s similar to stepping into a new culinary adventure; it’s thrilling, but the outcome depends heavily on your personal preferences, experience and knowledge you bring to the table, and the specifics of the deal.
When might buying a business for $100k or less NOT be appealing?
Let’s be upfront: a business valued at less than $100,000 might not always promise the financial windfall you are hoping for. Generally, the income from such an investment might not significantly exceed what one could earn in a full-time job, especially with the current average salary in Australia at about $90,000. Given the valuation multiples prevalent in various industries, your net earnings from such-business could range from a modest $50,000 (or less) to an optimistic $120,000, depending on the industry, risk factors, owner involvement, establishment etc.
The earning figure while may or may not be appealing, come with the responsibilities and headaches of business ownership, income instability, economy fluctuations, competition, and the initial financial investment, whether from your savings or a loan.
Yet, there are times when we recommend an under $100k business to a specific buyer:
1. Business Improvement: You Are experienced or have a deep understanding/knowledge of a particular industry and find a business with untapped growth potential (due to current owner’s inability or situation), if you are confident that you can turn it to a higher level of success and profit, then it might be a golden opportunity for you! With your vision, planning, and strategy, you can take the business to new heights, and potentially securing a satisfying return on your investment.
2. Strategic Acquisition: For existing business owners, acquiring a complementary small business can be a smart expansion strategy. It can offer a seamless way to widen your market presence, inherit an established customer base, and boost your brand’s footprint, often more efficiently than starting from scratch.
3. Vendor’s Urgency: Life’s unpredictable coincidences sometimes force business owners to look for an urgent sale (i.e. health, separation, moving overseas etc.) and to achieve a quick sale they usually need to compromise on price. When such unique opportunities arise they become lucrative deals for the wise buyers, provided the urgency is genuine.
4. Personal Circumstances: Special needs, such as visa requirements or budget constraints, might steer a buyer towards this price range. Even so, it’s possible to find opportunities that not only meet their criteria but also promise some level of profitability.
5. A Personal Decision: Besides the points mentioned, there are surely other reasons why someone might choose to invest in a small business instead of working a regular job. For instance, some people don’t like the idea of working for someone else and be overseen all the time. So, they decide to use their savings or take out a loan to buy a small, already up-and-running business. They might end up making about the same amount of money as they would in a job, but the big win for them is being their own boss. This is also a fair and respectable reason to take the leap into business ownership.
In conclusion, the journey towards buying a business, especially within the under $100,000 bracket, is filled with considerations both practical and personal. It requires a careful assessment of your objectives, industry insights, and the specific opportunities and challenges of the business in question. While not every small business investment will lead to financial riches, the right opportunity can offer a fulfilling path to professional independence and personal growth. The key is to approach this decision with open eyes, a clear mind, and a readiness to navigate the complexity of business ownership.
Tags: buying finance small business business owner tips
About the author
Sam Vasli
Sam possesses a great understanding, knowledge, and experience in various aspects of business ownership and operations. Over the past 14 years, he has ...
