After many years of buying businesses I have become a huge proponent of buying manufacturing businesses over any and every other kind of business out there -- especially service businesses. The main reason is because they are safe (from an investment point of view), have little overhead and need almost no attention, since they basically "run themselves."
But many times I am asked if there are certain industries or types of manufacturing businesses which I would stay away from. The answer is yes. I would definitely urge anyone to stay clear of buying anything in the automobile industry.
Why?
Well, mainly because the automobile industry has excessive peaks and valleys.
What these auto companies do is they give you as thin a margin as possible and as soon as you get used to it, maybe make a slim profit one year, they're back the next year trying to cut your price down.
So, it is very tough to make a good profit in a business like that. Plus, if you bring investors in, you're going to have years where you don't make enough money to get beyond the investors. In other words, there'll be enough cash flow maybe there to pay a return to the investors...but you and your family are going to be out on welfare or something because there won't be enough to pay yourself.
So you have to stay away from not only the automobile industry...but any industry with peaks and valleys that are continually working on you. Just like if you were buying a company that was selling to Wal-Mart. I mean you have to be crazy. Yes, your volume would be good. But, at the same time, they'll drive you nuts with their price cuts and gimmicks.
Bottom line: If you're going to go after a business that's making over $1 million (and that's the best way to go, in my opinion), my suggestion is to find one with proprietary products you can control. That way you're not going to have the peaks and valleys...you're not going to have to guess what the newest gimmick is going to be...and you're not going to have to spend all your time in there, nervously trying to get this thing to make money.

About Fordham & Associates, Inc.

Fordham & Associates is a business advisory and consulting firm that helps companies, entrepreneurs and investors. Companies monopolize their market, execute what's next, raise capital, go public, and execute turnaround. Fordham has provided solutions to 1200 companies in the United States. Fordham provides you with an assessment, free of charge. For more information, you can reach them at 949-200-7648 or e-mail at Fordhamassociates@yahoo.com

Contact: Simon Green, 949-200-7648
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