There are a number of reasons why people will want to buy an existing business instead of starting one from scratch. For one, it gives them instant access to the purchased company’s resources, key staff and equipment. Another common reason is that it grants them quick access to a new niche, thanks to the established brand and existing supply chain and customer base.
Acquiring an existing business has its own hurdles, though. It can be quite costly, and you might need heightened persuasive powers to charm the previous proprietor into selling their business to new management. Once you’ve had these out of the way, you should follow these tips to buy a new company and turn it into a long-term asset.
- Find cheap, poorly-performing but high potential companies.
Unprofitable businesses present much room for improvement, which will challenge and hone your entrepreneurial skills. A well-performing business with a for-sale sign will likely be very expensive, and you will end up getting blamed for any subsequent dip in its performance.
- Get professionals who can work out the figures.
While doing everything on your own may be cheaper, it’s always best to work with experts. You should hire an accountant or a consultant to calculate the price that’s reasonably appropriate to the company’s earnings so you’ll be sure that you’re getting your money’s worth. Plus, being armed with accurate statistics and numbers gives you an idea of what you are dealing with and is far better than coming into the deal blind.
- Agree to a fixed fee and set deadlines.
Fixing fees to certain limits ensure that you don’t spend more than you can afford or pay more than what your acquisition is actually worth. Furthermore, this, coupled with set deadlines, provide you and your prospective company constraints within which you can work out a fair deal. The bottom line is to be generous with your time but keep robust control of how much you are going to spend.
- Take time to get your new company in shape.
Once you have closed the deal and the company acquisition culminates, be sure to devote some time to work on your newly acquired business. You should also expect a drop in sales figures as you, the new leadership, deal with the learning curve following the takeover. As such, it helps that you first familiarise yourself with the business model and its existing processes before you start working on the possible improvements.
- Get to know the existing staff.
You will also have to expect reduced morale among the acquired company’s staff; there will be suspicions about the new leadership, and possible changes in the organisation will create fears of demotions, salary changes and layoffs. As such, you should position yourself as an approachable manager who is willing to work with the old employees toward the greater good of their company and brand.