Inheriting the family business could be seen as a golden ticket or an anchor. There are millions of Australians caught in the 9-5 grind who may assume they don't have the opportunity to make that decision.
Business consultancy firm NewCents founder Nick Richards told Yahoo Finance younger Australians who have spent decades establishing their own career paths may not be as fast to jump into the family business as generations before, exposing a lucrative opportunity for those ready to buy in.
"But it's important to do your due diligence on it, because a business is like a living thing...if you don't look after it, it dies and then there's zero value."
In generations gone by, small businesses would usually be passed down through the family.
However, thanks to the internet, you can now purchase that same family-run business from the other side of the country.
Scanning just one site where these businesses are bought and sold shows you could pick up a brand in virtually any niche.
There are thousands of businesses up for sale and it's important to know how to separate the good from the bad. (Source: AuBizBuySell)
Whether it's a Subway franchise restaurant, an e-commerce business, a publishing firm, or even a nutritional dog food delivery service, there's no shortage of sectors you could get into.
According to the small business ombudsman, there's a little more than 2.5 million small businesses currently operating in Australia who have between one and 19 staff. That's more than 97 per cent of the total number of businesses in the country.
More than 22 per cent of these business operators are 60 or older, meaning there could soon be 569,710 brands coming up for sale soon from retiring owners.
Richards said this trend, which has been called the Silver Tsunami, has been slowly gathering pace over the last few years, but is set to explode as many reach retirement age.
But he explained why it's not as simple as picking anything at random and hoping it'll stick.
Do you have a story? Email stew.perrie@yahooinc.com
What should I look for when buying a business?
Richards highlighted some of the things that he looks out for if he was to purchase a business.
"If they mention the financial performance or profitability in an ad, it means it's good," he told Yahoo Finance.
"Because you want to show your strengths, right?"
Find something that will withstand future downturns
While you could buy something in any sector, the NewCents founder said picking a business in a recession-proof and artificial intelligence-proof industry is ideal.
"I wouldn't touch many white collar businesses these days because a lot of them will get wiped by AI," he said.
"I like trade-adjacent businesses, like fence installations or pest control.
"Pest control is a great example because it's fairly recession-proof. You get a recurring income because people need it every year, they don't want cockroaches, and it's not that expensive."
NewCents founder Nick Richards said there are many factors to consider when buying a business as a wave of older Aussies look towards retirement. (Source: Instagram/Getty)
Boring is better
He added that "boring" businesses are usually the best avenue.
"The sexier the business, the more people who want to do it," Richards said.
"Pest control is not sexy at all, but if you had a good pest control business and a good database, you'd kill it."
Why is the business being sold?
If the job ad specifies that the owner is looking to retire, has health issues, or just wants more free time then that's usually a "green flag".
In Richards' experience, people usually sell businesses when they're not doing well financially.
However, if it's just someone looking to offload their hard work to someone willing to take the reigns then it's a much better sign.
What should I be wary of when buying a business?
Rapid changes might not be a good thing
When you buy a business, the owner will usually provide the profit and loss statements from the past three years.
It gives buyers an understanding of the financials and can expose things like seasonal fluctuations as well as whether there's been consistent growth.
Richards said you need to pay close attention to this as it will make or break your decision.
"You want it all to be pretty much the same for three years," he said.
"If there's a huge amount of growth in three years, then the question is, is the growth sustainable?
"If there's a huge decline, then the question is, what's causing the decline and will it continue?
"But if you look at it and they turn over $1 million a year every year for three years, and they net $250,000 for three years, then you've probably got a fairly stable business."
Who owns the business?
He added that another factor is also essential to consider.
"I'd look at if the business was completely owner-dependent," he said.
"Imagine a gym, personal trainer, or physio as examples, those businesses are generally built around a single person or a couple, and people go for the community, the owners and everyone.
"So if the business is completely driven by the owner's presence, it's very difficult to buy or sell it, because half the people might leave."
How is the business being sold?
You can buy businesses from licensed brokers, just like you would a house, but you can also get one on Facebook or Gumtree.
This isn't aren't necessarily red flags, as the owner might just be looking for a low-key sale, but it can carry some risk.
"They're probably not a very big business," Richards said. "And it's probably not at a professional level.
"It has pros in the fact that you might get a better deal because the owner doesn't know the hell they're doing, but the con is you might get ripped off because it's the Wild West.
"If a broker knows a business is collapsing, they won't sell it."
When should you buy and when should you start your own?
Considering how much information there is out there, and the ability to find manufacturers, suppliers, or clients with the touch of a button, it can be tempting to start your own business.
But Richards said buying a business makes sense if there is a "high-barrier" to entry.
He gave the example of getting a swimwear business for $300,000.
Unless that brand had an "incredible" presence in the market, you'd be better off starting your own for $50,000 because you can get most of your products done by someone else.
But he said something like a truck and trailer business would be "very hard to start" for the average Aussie because you need a lot of infrastructure, distribution agreements, and other aspects.
A wave of Baby Boomers will soon be selling their businesses and it could be the perfect time to pick up a well-run operation. (Source: Canva)
Richards warned that you should have at least some knowledge about the sector before buying.
"You need to understand the mechanics of the business in order to get it to run properly," he said.
"If it's a reasonably simple business, you can learn it, so it's not too bad, but generally, I discourage people if they're thinking of buying a business in an industry they have no familiarity with because there's just too many ways for it to go wrong."
He said you might get ripped off from suppliers or a manager that you hire might not run it in the right way.
If you don't know any better, you could be accidentally running your new baby into the ground.
He's seen plenty of people wanting to buy something without any prior experience that requires virtually no effort and will generate them passive income.
"Bro, that doesn't exist," he said.
It's also worth noting that owning your own business might allow you to escape the corporate ladder, but you could end putting in many more hours than 9-5.
If you want it to succeed and grow, you could have many long, hard nights ahead.
