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Industry vs. Location: Where You Should Start Your Business Search
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The journey of a thousand miles starts with a single step.
But you should probably make sure you’re headed in the right direction first.
One of the most critical decisions you'll make when buying a business is deciding where to look. As I start my search for a business, I’ve narrowed down my scope to three main areas:
This article will guide you through my criteria, helping you identify a niche that combines with your interests, skills, and long-term goals with the reality on the ground.
Let’s look where to begin.
I. Deciding Between Industry and Location
When starting your search, you’ll need to decide whether to focus on a specific industry or a particular location.
I know I have price listed above, but here’s the thing with that.
Price is a good guideline, but don’t get too fixated on it. Business location and industry are rigid parameters. Price, however, can be negotiated and you can get creative with financing.
Plus, for a great opportunity, you’ll be able to attract outside investment. So, it’s good to have a starting point, but focus on the other two items.
For location and industry, each approach has its unique benefits and challenges. The best choice depends on your personal goals, expertise, and resources.
II. Focusing on Industry
1. Trends and Growth
Start with researching industry trends and their growth potential.
One tactic is looking for sectors attracting investment and innovation. These emerging industries can offer exciting opportunities, but they also come with higher risks.
Established industries, on the other hand, may provide more stability but could be saturated with competitors.
Having a clear long-term plan for the business will help you have this decision.
Are you looking to scale then sell the business? Or are you wanting to build a portfolio of reliable businesses?
2. Personal Interests and Expertise
Your passion and expertise can significantly impact the success of your business acquisition.
If you’re getting into a technical or emerging market, having a detailed understanding may be a pre-requisite. While you may not be working IN the business, you’ll need to make sure the people you hire are savvy.
Ultimately, you want to be interested in the field because you’ll need to wake up every morning motivated to work. Without a passion for the topic, this will quickly turn into a struggle.
3. Market Demand and Competition
For every industry being considered do a SWOT analysis.
Strengths, Weaknesses, Opportunities, and Threats.
The first two are looking internal to a particular business. The latter two are external to the industry as a whole.
Is there room for a new player in the market?
Can you offer something unique or superior to what's already available?
Identifying a niche with unmet needs can give you an indication to whether there’s a quick competitive advantage that’ll let you quickly scale.
4. Regulatory and Legal Environment
Each industry comes with its own set of regulations and legal considerations.
I’ve considered buying a marina, but especially in California where I’m looking, there are a host of regulatory policies I would be responsible for.
Hazardous materials. Environmental restrictions. Permitting and licensing requirements. The list goes on.
Ensure you understand the regulatory environment of your chosen niche. There may be significant compliance mandates or legal hurdles that’ll impact your operations.
5. Lifestyle and Personal Goals
This one is arguably the most important.
Think about what you want your relationship with the business to be. Some businesses require constant attention and hands-on management, while others may offer more flexibility.
Consider how the demands of the business will align with your personal life and your long-term plans.
I, for example, want to have multiple businesses in a portfolio, which means I either need to scale them to a point they can function independently from me or they need to be there when I buy them.
Candid conversations with the current owner will give you insight into what to expect.
III. Focusing on Location
Some people have complete freedom of movement around the country and are looking for the best opportunity, agnostic to the industry, while others are limited to an area.
Regardless of the reason, here are some things to consider when using location as your search criteria.
1. Local Market Conditions
Understanding the area and its unique characteristics is crucial.
Research the economic conditions, population demographics, and consumer behavior in your target location to educate yourself into what that micro-economy can support.
You don’t want to end up trying to sell ice to an Eskimo, so make sure know what the area needs.
2. Industry Presence and Competition
Don’t let competition discourage you, but you also shouldn’t make it harder than it needs to be.
The gold standard is to find an industry that is thriving in one location and lacking in another. If you can step into a business, expand its services to fill an unmet need, then scale, you are positioned well for success.
But make sure you first look why that industry doesn’t have a presence in that location. There may be some hidden red flags you should know about.
3. Regulatory and Legal Environment
Operating a brewery in Utah is very different than one in California.
Utah has very strict limits on the alcoholic content of its beers, which means you’ll be limited in what you’re able to brew. Making sure you’re aware of restrictions like this is critical when validating the growth plan for your acquisition.
4. Labor and Logistics
The last thing you want is to have a great business only to discover that the local population doesn’t have the talent needed to support you.
If the company requires skilled labor or detailed industry knowledge, make sure your candidate pool has it.
Additionally, if the business requires significant vendor and third-party support to operate, ensure those services are in reasonable proximity.
The good news is that if those services aren’t available, but needed, this might be a good business oppportunity.
5. Lifestyle and Community
Finally, you’ll want to make sure you enjoy living where you work.
Some people are perfectly happy picking up from San Diego and moving to a small town in Arkansas for an awesome business opportunity (my cousin did exactly this).
Others, myself included, would rather find a mediocre option and remain in place because they prioritize location over work. This comes down to knowing your priorities and being honest with what’s important to you and your family.
It’s not always what YOU want. Family dictates a lot.
Choosing the right business niche for your acquisition search is a multifaceted decision.
By considering market demand, financial stability, scalability, regulatory environment, and your lifestyle goals, you can narrow down your options early and make sure you’re only looking in areas that make sense.
Plus, this gives you a point to deviate from. You may realize that the original industry isn’t as appealing as you begin to dig. Or maybe you find the location doesn’t support the industry.
Regardless, by starting your search with a clear understanding of these criteria, you'll be well on your way to finding the perfect business to live the life you design instead of taking what’s simply the default.
This week's Harder Not Smarter Podcast episode:
EP028 is an insightful conversation with Mark Devine, former Navy SEAL and founder of SealFit, who unpacks the integration of yoga and mindset training into the SEALs. From the history of SealFit to the transformative power of meditation and breath control, Mark reveals the secrets to holistic personal development. Discover how aligning with your purpose and overcoming obstacles can lead to a fulfilling life. Don’t miss out on this episode that promises to inspire and empower you to prioritize what truly matters. 🎧 Listen Now
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