Buying an existing business will give your business immediate growth. With your purchase, you are expanding your client base and sometimes eliminating a competitor. Inorganic growth, however, will require more capital investment. In contrast organic growth can take a long time but it might be a preference for some business owners because of the lower risk.
How to Make an Acquisition More Successful
You can improve the chances of the success of your acquisition by putting together a strategic business plan. This should include asking yourself a few questions, such as, if you purchase the business, what do you hope to gain from it? Are you most interested in increasing your shareholder value, market share or buying out the competition?
Finance, Human Resources and Operational Processes
Sometimes the business you are buying needs to be restructured. This will include integrating the finances and operational procedures. Because often an acquisition puts pressure on the cashflow of your business, you need to have a plan in place. This might involve financing strategies for the acquisition, such as seller financing, term debt, minority equity, or a hybrid financing model. Decisions about staff and managing the business should also be discussed and thought out.
Do Due Diligence
So you think you know your competitor. But do you really? There could very well be hidden elements you know nothing about. Do due diligence so that there will be no surprises. You’ll want to look for hidden legal problems, learn about its current and past employees, dig into why the owner is selling the business, and make yourself aware of trends in their market (if different from yours). Getting deep into the ins and outs of the business will also help you know how much it is really worth.
Mergex can help you in your buying process.