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• The disappointing small business
• Useful resources for small business owners

The disappointing small business

An unfortunate situation, common to small business owners, is the purchase or development of a "disappointing" business. When defining a business as "disappointing", we've concerned ourselves with a conservative, but useful, analysis. If you buy a business, it should provide two returns.

1. A return on your investment. For example, if you invested $50,000 in a business, you should expect to earn anything up to $15,000pa, or 30%pa, after tax and your wages. Why up to 30%? Because you can earn 5% investing the money in a bank at very little risk. The other 25% is the extra return to cover the risk inherent in your business.
2. You should be able to earn a wage from the business. If you didn't draw a wage this month, for whatever reason, your business is not providing a decent return.

However, many owners will accept a "disappointing" business so long as the wolves are kept from the door. This may be a valid decision, in order to provide a particular lifestyle, for instance. But, on balance, it means that in the short term you're unable to plan and save for the future, and that in the longer term you may lose your investment and livelihood.

The advice from the Shape of Money is to seek advice today. It's not uncommon for small business owners to discover they've invested in a "disappointment". There are many reasons for this, ranging from being ill-equipped to ask the right questions in the first instance, through to being over-sold the potential success of the business.

The following page provides a list of useful resources for the small business owner.