The Unicorn Sought After by Small Business Buyers – From Jordan Zweigoron
“…I want to buy a business that runs itself….”
“…I’m looking for a business with a self-sufficient management team…”
“…I want to acquire an absentee owner business…”
I hear this sentiment from would-be buyers time and time again. When my daughter was young, she would say, “Daddy, I want a unicorn.” And I would reply sincerely, “I’ll gladly bring you one, if ever I find one.”
In the realm of small businesses for sale, it’s unusual for any small business to operate so efficiently, that it can literally change hands without any direct supervision from the new owner. If a small business can run this effectively, the Seller’s cost of stellar management will have quickly eaten up any profit margin, rendering the business of little acquisition value to a Buyer in the first place.
For potential buyers looking to acquire a business, I always encourage a healthy dose of reality. If you’re looking for passive investments that generate routine cash flow month after month, you may be better off investing in dividend stocks or crowd-funded real estate platforms. Small business ownership is messy by its very nature. Even well optimized small businesses require an owner who can step in when the going gets tough – if not on a daily basis. Hypothetically, let’s say you acquire a profitable restaurant with a world-class chef. The business may “run itself” for months after your acquisition, until the chef finds a better job offer. And what then?
It’s difficult to imagine any business available for acquisition that does not require direct effort from a new owner. Buyers who are seeking to acquire a business that is 100% absentee in nature should take a hard look in the mirror and consider their options.
For Sellers, it’s useful to acknowledge that Buyers are drawn to the notion of acquiring a self-running business. Your business undoubtedly has many moving parts; with bottlenecks only you can break. In spite of these daily challenges, endeavor to simply get out of the middle. While you may never reach the goal of completely stepping away from your business and making it “self-running,” you may get closer than you are today. And in doing so, your business becomes increasingly valuable to buyers. A side benefit of strategically “working yourself out of a job” is the precious time such a move creates. You can use this new time to further expand and diversify your business, or spend more time with friends, family, and cultivating hobbies outside of your business pursuits.
My daughter is now grown up, and she understands that unicorns only exist in children’s books. Eventually, every small business Buyer similarly grows up. And with maturity, they roll up their sleeves and work hard in the business they acquire; or alternatively, they outgrow the unicorn chapter of their life and return to the comfort of a full-time job.