The majority of advice for buying a business focuses on scrutinising cashflow forecasts, balance sheets, business assets etc. and warns against getting emotionally involved. If you read any ‘pitfalls of buying a business’ type articles, making a decision using your heart is usually one on top ‘don’ts’; a sure fire way of losing your money and your business dreams.
But although it’s essential to crunch numbers and make sure that the business is a good investment, I think decisions of the heart also need to be part of the equation.
There’s no getting away from it; buying a business, and then running your company is an emotional business. The ‘highs and lows’ of running a business is something many of us talk about. The rollercoaster that comes with being self-employed, being responsible for and relying on employees, making sales and driving your business forward, can be tough on you emotionally.
Which is why I think that emotions need to come into the buying decision early, to test out whether you have that emotional resilience, to listen to gut feelings, and crucially decide whether you have the passion to run that specific business.
Making Good Business Decisions
So having properly evaluated a potential business using your brain, if it’s still in the running now’s the time to get your heart involved.
Gut Instinct / Intuition
“I rely far more on gut instinct than researching huge amounts of statistics.” Richard Branson
While I wouldn’t recommend ignoring the data, there’s something to be said for listening to your gut instinct. Although it may seem unscientific, gut feelings are often based on experience. Intuition draws on previous experience and could potentially identify factors that aren’t apparent in the numbers.
For example, your gut instinct may sound warning bells reminding you of a comparable situation where things didn’t work out. By listening to your gut feelings you might want to go over the data again, or have another meeting with the person selling the business; either to put your mind at rest or to identify the problem your heart / gut is warning you about.
On the other hand, gut instinct may tell you that this business is a winner compared to other opportunities. Steve Jobs famously predicated that tablets would overtake the PC using his gut instinct, ignoring some of the data that suggested otherwise.
Passion For The Business
No doubt some people are looking for a business to buy based purely on the opportunity in terms of revenue and ROI. However, at some point passion for the business has to come in if you are to be successful. Driving growth, selling products, inspiring employees, and motivating other stakeholders all requires some level of emotional investment and passion for the business.
Therefore I think it’s really important to question how you feel about different business opportunities – do they excite you, can you sell the business proposition with passion to others?
Is your heart in it?
Being able to cope with stress, crisis and failure is what emotional resilience is all about. While this might suggest that it’s to do with keeping your emotions in check, it’s more about being emotionally stable. If you’re emotionally fit, you’re in a much better position to deal with adversity and apply strategies that enable you to get through tough periods.
Having emotional resilience is important right from the start – buying a business can be stressful and stress can affect your decision-making. So it is important to assess whether you have the skills in place to respond to the unexpected in a positive, productive way. If you’re lacking in these skills, now’s the time to get in touch with your emotions before taking a momentous decision like buying a business.
Fortunately, emotional resilience can be taught and there are plenty of online resources available. Recently at The Farnham Hub VIP member Julian Jaffe delivered a workshop in building resilience, sharing easy to learn techniques that help business owners keep focused and overcome adversity. If you run a Business Hub or networking event, I would highly recommend inviting Julian to speak.
At the end of the day, buying a business has to be a combination of brain and heart decision making; in that order! Weigh up the data – the balance sheets, cashflow forecasts, etc. – do your homework and analyse everything carefully.
Then listen to your heart – trust your judgement and gut instinct, ask yourself whether your heart’s in it, and whether you’re emotionally in the right place to make that decision and take the opportunity forward.
If you have experience of heart vs. brain decisions in business and would like to share them with our community, leave a comment below.