BOSS Theory- What small business buyer should look for

March 23, 2010 by Dan Munter

I recently participated in a Webinar on How to Buy a Business by industry expert Richard Parker (Diomo.com) and one of the topics discussed really hit home for me...

There are 4 qualities of a business that will help a new small business succeed with his new purchase. The 4 components can be remembered with the anagram called the BOSS Theory:
B-Bland. A business that is today's 'hot new business" will become the 'out of style business' of tomorrow. A bland business is less vulnerable to fads and innovation.
O- Operational sound. Buying a turn-around business is very risky. There are people who specialize in turning around companies. It really takes a different skill set then simply running a business. There are enough challenges in taking over a business without having to engineer a turn around.
S-Sustainable. A new business owner wants a business that they know will at least sustain the level of revenues and profits that they are paying for. If there are looming threats such as having most of the customers or suppliers concentrated with a few companies than the sustainability of the business could be in jeopardy if one of these customers or suppliers would leave.
S-Scalable Are there realistic growth opportunities?

An example can be seen with a current listing of mine (BizEx181-DM: Los Angeles based distributor of buttons,costume jewlery,trim and beads) It is a large distributor of 'bland' items such as beads, buttons, trims, and costume jewelry. It has been operating since 1988. It is profitable. It has a revenue mix of 50% retail and 50% wholesale. And it has a big growth potential. Currently, there is only approximately 5% of its inventory on its internet site. That 5% is generating 20% of its sales. If a new buyer placed the other 95% on line, the seller believes that revenues could increase by 400%!

A company like this is BOSS.

Uncategorized, How to Buy