Now that we’ve learned the pros of buying a business, let’s analyze some of cons and disadvantages:

1. Costly

You must understand here while there can be a long possible list of reasons a business is put on sale, the bottom line is always to make as much money as possible upon exiting.

The price tag does not only take account the startup investment but will also consider potential market, inflation rate, profit projection and so on. This can translate to an exuberant amount of money.

A prudent entrepreneur, on the other hand can start a new business with a small amount, and build up his business while investing more and more money to grow his business.

2. So what it’s (the brand name)

Sometimes, the company we’re buying has a long history stretching back some 50 years ago and perhaps is in fact a household name and brand. For example, concurrently franchise outlet owners would decide to sell off his franchise right to venture into other business, relocating or simply retiring (meaning he’s gotten rich enough). So, if you’re buying a right for 7-Eleven, what’s the big deal? Yes, true, you will get a lot of money soon, but there is a little sense of belonging as far as the brand is concerned. You didn’t build it.

3. You buy a sinking ship

No voyage can be worse than coming onboard a sinking ship, no matter how big and beautiful the ship can be. It can be as big as Titanic but we all know the ending of the story. Sheer sadness. While we have taken the extra precaution in doing all sort of financial analysis, sometimes there are matters that we overlooked. A leak in the system, if goes uncovered, will slowly yet surely sink the business. When we sense something is wrong, we try to find the leak. When we find it, it’s probably too late to save the day.

4. The intangible and unseen factors

Most people do little analysis on this aspect, which can yield a catastrophic results. Sometimes the fault lies within the previous owner – e.g. bad relationship with vendors, spat with the premise owner, marriage scandals, chased by loan sharks and so on. Not far away, there are eyes watching with personal vendetta in mind without realizing the business has exchanged hands. That’s why it is equally important to analyze various other elements in the business. You may even perhaps want to hire private investigators to see if there is any wrong with the business we’re buying.

5. Short lifecycle of product/services

Apparently, there are business out there relying much on buzz and hype. Such a good example is the Mexican bun’s Rotiboy story (read article: Rotiboy Story – The Rise and Fall). Once discovered a few years back, people were lining up to buy the buns and at the height of its fame, one outlet was selling 20,000 pieces of buns per day. Sensing opportunity, new entrepreneurs jumped bandwagon, opening the likes of Pappa Roti, Roti Mama, Roti Mum, Mr Bun and so on. When the buzz was over, the business shrank to the size of a peanut.

Major economic powerhouses such as United States, Canada and Europe are heading towards recession. Japan too, is not spared.

A recent report by Merrill Lynch indicated that the country is likely to embrace recession in the next 12 months. The cabinet in the Prime Ministers office is expected to officially declare an economic recession in due time.

The falling numbers of exports, drop in public and private investment, and lower consumer spending combine to shake the economic pillar of the country, with its GDP (growth domestic product) shrinking by some 0.6 percent. The rate of the downturn is the fastest and ugliest since the last recession in 2001.

Japanese based automaker, Toyota, which is currently the world’s biggest car maker has seen its profits slumping close to 30% as the continued increase of petrol price put off consumer’s interest to buy vehicles. Its sales in America is the worst hit and its performance of going 7 years with full profits is in grave danger.

“The increase in oil and commodity prices is damaging corporate profits, while rising inflation is hurting households,” Mamoru Yamazaki, chief economist for Japan at RBS Securities told The Times, UK based newspaper.

Japan was struggling during the recession periods declared separately in 1998 and 2001.

20 sample questions for employment reference check:

1. How long you have known the person? In what capacity?

2. How would you describe this former employee of yours, in one phrase?

3. Do you still remember the exact reason why the person left your company?

4. Would you be able to describe his roles and responsibilities during his/her tenure in your organization?

5. Can you describe about the employee’s performance as a (job position)?

6. Was there any issue regarding about his attitude that we need to be aware of?

7. Are you willing to accept this former employee working with your organization again?

8. Are you able to describe his relationship with other peers, colleagues and superiors? Did he get along well with others?

9. I can see that he worked here for 4 years without any promotion. Is there any reason to this?

10. In your own observation, which are the areas of work and job functions he can do most effectively?

11. I can see in his resume that he oversaw 2 subordinates while working in your company. How do you rate his supervisory and leadership skills?

12. Will you be recommending this person for a position with another organization?

13. What are the person’s areas that you feel can or should be improved?

14. By a rating between 1 and 5, with 1 the lowest, how would you rate the person’s attribute in terms of – a) Attitude, b) Punctuality, c) Work Commitment, d) Leadership and e) Crisis Management?

15. What were his major achievements, contributions and accomplishments to your company?

16. Has the person been subject to any disciplinary action before?

17. How was his approach in solving tough and challenging problems?

18. What management style do you think will bring the best out of him? What would motivate him?

19. How do you think his suitability of him for the (job title) position in our company? Should we consider him?

20. Is there any final words or advice you want to give us about your former employer?