Evaluating A Business

By Brian Tracy

Do Your Homework
The best time to do your market research is in advance. Here are some key ideas to help you make the right choice before you invest in a product, a service or a business.

Bootstrap Your Way To Success
One of the best ways to build a business is to start off on a bootstrap. This means that you start off with very little money and you grow your business with the money that you earn in the business, rather than outside financing, borrowing, loans from friends and so on.

Ask The Right Questions
The first thing to do is to research all competitors for the product or service and ask this: "Why would someone switch to buy from me?" If there's already a similar product or service in the market, why would someone leave a product or service that they're comfortable with for your product or service that they don't know anything about? Is your product or service better, or is your idea cheaper or of higher quality? And can you convince enough customers of this to stay in business?

Look For The Fatal Flaw
The second way to do fast, cheap market research is to be suspicious. Be wary. Develop a cynical, pessimistic attitude and accept nothing on faith. Look for the fatal flaw. Whenever I've done consulting for a corporation, especially when they've asked me to research an investment, I always look for the fatal flaw. I always look for the one thing that's wrong with this investment that could cost my client a lot of money. And do you know something? In 99 out of 100 cases, I find the fatal flaw. I find something in a contract or a mortgage agreement or something in the way the land is laid out or the way the distribution arrangements are designed.

Find Out Why It's For Sale
I often find something that is fatal, something that if it were not caught, would lead to the failure of the business. When you're thinking of getting into somebody else's business or if somebody else is trying to sell you an existing business, look for the reason. There's always a fatal flaw when someone is trying to sell you a successful money-making opportunity. If you can't find the fatal flaw, only then should you go ahead with it.

Don't Lose Money
The third thing that you can do when considering a business that is for sale is find out why it's being sold. Very few people will try to sell you a successful business. Usually people who are selling a business are selling it because they're losing money on it. Many people say they're selling a business because they want to concentrate on something else. No. The reason they're selling the business is that they're losing money on it. And you must find out why a person would sell a successful business.

Think Long Term
Finally, number four, look at the business before you go into it as though you were going to be in it for 20 years. The long-term perspective sharpens short-term decision-making. If you look at any business venture, any product or service, as though you were going to be doing this 20 years from now, you'll find that you'll make much better decisions.

Action Exercises
Here are two things you can do immediately to put these ideas into action.

First, look for the fatal flaw in any investment that someone tells you is a good idea. Look for a critical weakness that could cause the business to fail.

Second, think about being in this business, or selling this product or service, for the next 20 years. When you think long-term about business decisions, you make much better decisions in the short-term.