Various business people describe Small businesses as those businesses that are privately owned. They can either be categorised as corporations, partnerships or sole proprietorships. According to tax policies and government support, different governments classify businesses into the small business category based on the number of employees it has. For example in Australia a business is considered to be small if the business has an employee number below 15 and in the European Union it’s 50 employee or less (Steingold, 2011). This paper will focus on Gentlemen’s Top Option [GTO].Business Model
GTO is a small business based at downtown Burlington, Vermont. It has been operational since 1996 and its services include exclusive full salon services for men. They offer individual services like men’s grooming, haircutting, hair removal, hair colouring and massages. They ensure there quality services by hiring of proper trained staff and keeping their employees motivated thus ensuring that they stay dedicated to offering quality services to their clientele (Gtovt.com, 2016).
GTO’s customer base is spread across all ages of men in Burlington and around the state of Vermont. Their main revenue stream comes from offering grooming services and haircutting services to middle age men and children that frequent the business place. In addition to that, they also sell men’s care products like the shampoos and conditioners to help them make more money and also aid their customers maintain the GTO look (Gtovt.com, 2016). GTO also offers massages at 30, 60 and 90 minute intervals depending on the customers’ financial capability thus being one of the major revenue earning services offered there (Gtovt.com, 2016).
GTO is a multi-service provider small business thus I would consider prior training before assuming ownership for the following reasons:
Smooth Transition in Ownership
One of GTO core values is Loyalty. The GTO business values advocates for loyalty to customers and the employees as a team (Steingold, 2011). As the new owner I would learn how the previous owner managed to keep both the clients and employees happy thus making them loyal to the business. The drastic change in ownership may make us lose some of the loyal customers because of the change in leadership and ownership so earning their trust would be the first step (Steingold, 2011).
To learn about the services and products provided by GTO
As the incoming owner, my customers and employees will expect me to know what the business entails as far as the services provided and products are concerned. This will also help me have an in-depth knowledge of my business thus ensuring my capabilities to make the right decisions when it comes to making major decisions in my business (Steingold, 2011).
I would consider the following factors when carrying out a feasibility analysis & due diligence:
As the incoming owner I would like to learn more about the marketing information by first considering the market share of the GTO business. This will let me know our niche in the market. If the market share is too low then I cannot buy GTO business because it is bound to fail. Secondly I would consider the GTO’s Chief market area and if the major marketing areas do not bring much return to enable the business stay afloat, it won’t be eligible to be bought by me. Finally I would consider the product lines information to access if there are potentially valuable new products that can help boost the business revenue (Steingold, 2011).
I will go through the legal material at GTO e.g. bylaws, the basic documents and permits for operation, supplier short-term and long-term agreements, stock levels and statues and pending, present and immediate legal threats to the company to ensure I do not inherit any legal problem from the previous owner e.g. lawsuits (Steingold, 2011). If GTO will be facing legal matters that may affect my business significantly after the change of ownership then buying it will not be a good option (Steingold, 2011).
Being a multi-service provider business it would be wise to consider the operational information. This reflects & affects the day-to-day operations of the business. One would have to consider the factors like the company’s policies, usual employee’s working hours, Organizational maps, various employee’s job descriptions, workforce listings and even the eventual company benefits (Steingold, 2011). In addition to that the buyer must also consider if the workers he/she may inherit belong to a trade Union.
The buyer must also consider the total business running cost at the time. If it surpasses the net profit the business makes by the end of one financial year then one should be advised against buying such a business (Steingold, 2011).
As I negotiate to buy the GTO business I would consider negotiating the following areas with the business owner
As an established business that has managed to stay afloat since 1996 some of the employees are so experienced in their respective lines of service delivery thus earning some loyalty from some of the frequent customers. This is because their longer stay at the business has significantly improved their skills as far as offering their services to the clients is concerned. As a move to avoid starting from scratch and also preventing the migration of the loyal customers to my competitors, I would negotiate with the outgoing owner to help convince most if not all the employees to remain at the business (Steingold, 2011).
I would negotiate with the selling owner with the aim of bringing his selling price value to within the range of my walk-away number (Steingold, 2011). This will ensure that I don’t waste a lot of money past the limit I had set prior to the meeting with the seller.
Advantages and disadvantages of buying GTO business
The advantages of buying GTO business from a prior owner include:
Buying the GTO business gives you a heads-up and you will not have to deal with the difficult start-up work because the previous owner will have already done that.
Buying GTO will ensure immediate cash flow as we retain the previous owner’s customers.
The fact that GTO has a financial history it reduces the risk of making losses because you will know what to expect at what time and season and on the other hand it increases the chances of securing a loan.
Buying GTO ensures an already established market for product and services for the new business (Steingold, 2011).
The inheritance of employees and managers from the past owner will ensure that you have a credible and experienced workforce that reducing the odds for failure of the business.
The disadvantages of buying GTO include:
Buying of GTO may force you to invest large amounts of money on the first instance if it’s to achieve the financial goals set for the financial year
With the change of ownership the business risks having set-backs due to lose of morale by the employees that are against the take-over.
The seller of GTO may eventually contribute to the fall of the business if he/she had a bad reputation with the stakeholders and customers
With the change in management the company may take some time before getting back to its full capacity i.e. good service production and product sales (Steingold, 2011).
In conclusion the purchasing of any business enterprise requires keen analysis of the facts on the ground if the business is to survive in future.
- Gtovt.com. (2016). GTO- Gentlemen’s Top Option: A Salon Designed for Men in downtown Burlington, Vermont. [Online] Available at: http://www.gtovt.com/index.php [Accessed 11Mar. 2016].
- Steinngold, F. (2011). The Complete guide to buying a business. Berkeley, CA: Nolo.