If you decide that you'd like a complete break from your current industry, you might consider buying a franchise or a business that's already operating. Laying out some cash to buy a business in exchange for the time you would have spent starting and building it may be a good fit for you if you have the means and are anxious to get up and running. The support of a good franchise or training from the selling business owner can also bring you more quickly up to speed.

Business in a Box

It's surprising how many different types of franchise opportunities exist. Franchises such as senior home care and lawn and home maintenance, and business services such as signs and advertising, provide a huge array of business sectors to choose from. Initial investments range from a few thousand to hundreds of thousands of dollars. The franchiser — the company or individual that owns the rights to the business and grants licenses to run its franchises — generally provides the business plan and regular support and training to the franchisees. Franchisers usually receive a portion of gross sales or a regular fee that pays for marketing and support.

Buying a business that is already running skips the steps needed to build the business and business processes. A going concern will have already refined the service or product offering and should have an established brand in the market. Buying a business from a retiring founder or business owner will give you more autonomy than a franchise, but less support. The buyer usually makes an initial payment, and then the seller continues to work in the business for a short period of time for an income called an “earn out.” This earn-out period gives the buyer time to learn the business and allows for a smoother transition from seller to buyer, and hopefully better customer retention.

Things to Consider

Franchisees often complain that the support they get from the home office is small compared to the franchise fees they are expected to pay. As a franchisee, you'll have limited say in the marketing plan and budget of the parent company. A successful franchisee is one who can negotiate and bargain with the home office when needed. Be sure to interview a number of current franchisees about their experience with the company before buying in. Be sure to learn about the training and hiring support and ongoing marketing expectations of the company. Newer, less-proven franchises will have lower initial fees. Consider your ability to build on the foundation they have created if you're considering a younger, riskier franchise.

Buying a business is a lot like entering into a short-term partnership. Be sure to create your own team of advisors to help you with the negotiation and purchase of the business. A business attorney experienced in the field and an accountant who works for you exclusively — not both you and the seller — is crucial. Check with your local Small Business Administration office for referrals to advisors.

Due Diligence

You need to interview other franchisees and the customers and employees of the business you're planning to buy. Your accountant will help you review the books of the franchise or business. Reviewing the last three years of financial reports will help you see whether the business is growing, is shrinking, or has plateaued financially. If growth has been flat, you'll need to decide whether you have the energy and time to commit to reinvigorating growth or whether you're better off looking for another opportunity.

Be sure to test best- and worst-case financial scenarios with your CPA so you can understand what effect the investment might have on your retirement plans. A business risk you might have been willing and able to take in your 20s might be unreasonable in your 40s or 50s.