Common Characteristics of Profitable Businesses

As a Business Broker I’ve had the opportunity to meet with and analyze more than 2,000 businesses. I have come to discover that there are 6 basic characteristics that are almost always found in profitable businesses.

6 Characteristics of Profitable Businesses:

  1. The business owner has an firm grip on reality. They understand the good and the bad of their industry and their business.
  2. The business owner spends the money to get good advice. They have an accountant, attorney and financial adviser that is competent in the specific industry and size business.
  3. The business owner makes a good faith effort to have systems and procedures in place so that their product or service experience is repeatable. The vast majority of activity is done the same way each time. 
  4. The business owner is always trying to find ways to do #3 better.
  5. The business owner doesn’t blame his employees and his customers for his results. It is shocking to me how often this is the case in bad businesses.
  6. The business owner owns the business for a reason other than it’s just a way to make a living. The owner might want to sell the business to fund their retirement or next venture or pass the business on to their kids or create enough profit to fund a charitable cause important to them or operate a business to allow them enough free time and money to pursue an important cause.
Businesses and business owners with the above characteristics are much more likely to be profitable, more valuable and easier to operate than businesses without these characteristics.
Are there other characteristics that are important to you as a customer? Can you identify businesses with these 6 characteristics?
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