Question:
I have a regular job and I am looking to start a small business on the side. I would initially run the business on a part-time basis and employ a manager to run it and if it picks up fine, I am planning to quit my job down the line. Is this something that is possible? I am trying to buy a small pizza place or sandwich joint or ice-cream parlor. I want to keep the cost below $150,000. I have found a few listings in this range, with annual sales of around $300,000 to $400,000 and making a profit of around $40,000 to $60,000. In all these small mom and pop shops, I found that the owners spend a lot of time on the shop. My question is: can I run such a small business without full-time attention? If I employ a manager to run the show, how much will it eat into the bottom line and is that a reliable form of running this business? What sort of businesses can be run on a part time basis initially? Thanks for your response.
Answer:
I certainly admire your strategic plan. Buying a business and getting it going prior to quitting a job that pays your bills is a good idea in theory. Unfortunately,
the reality is that in small businesses, absentee ownership is usually only successful where there is not a need to have supervisory personnel in place to oversee the operations.
Coin laundries work well. Restaurants don’t. Self-service car washes are good. Retail stores aren’t.
The barometer to use is: when a customer comes into the facility or conducts business with the enterprise, what are all of the possible challenges that may arise and can they be handled properly by someone outside of the owner, and at what cost?
As such, if your objective is to buy the business, hire a manager, and have a decent profit left for yourself, a pizza parlor may not be the right choice. The only time it will work is if you’re generating at least $60,000 in profit. You can pay a manager $30 – $40k and be left with $20,000. As a passive investment, that is a reasonable return. But, there are other considerations:
- Can you trust the manager to operate the business as you would?
- A pizza parlor generates a lot of cash sales. This can be very tempting for any employee and more so when the boss is not around.
- What if the manager quits, or gets sick for an extended period? Do you have the flexibility in your job to jump in?
Personally, I am not a fan of absentee businesses. I think part-time work equals part-time profits. Plus, there’s no ongoing effort to build the business. Once again, I think you need to look more at businesses that really can operate without a manager. Or, simply