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Are You Buying a Job or a Profitable Business?

Cookwork Perspective: Many chefs are approached with the opportunity to buy into franchises or existing businesses.  Take the time to properly evaluate the business before opening your wallet or you could just be buying a job.

created on: 06/21/12Are You Buying a Job or a Profitable Business?

If the current owner is working in the business but not taking any compensation, come up with a reasonable compensation figure and deduct that amount from the profit the business is reporting. If the profit disappears after that adjustment, “you’re buying a job. If you’re competent and have a good résumé, you can probably find a job without paying anybody,” says Joe Knight, co-owner of the Business Literacy Institute and co-author of Financial Intelligence.

Bill Hettinger, principal at the Institute for Finance & Entrepreneurship and author of Finance Without Fear, agrees: “If the business cannot afford to pay the staff, including the owner, and produce a profit, it’s not a profitable business. Without some changes, there won’t be a return on the investment.”

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