An alternative way to achieve a fast increase in the size of your company is to make an acquisition. This means buying a company that you can merge with your existing business. Sometimes the investment you would have to make to reach a certain size in 2 to 3 years can be more than the cost of acquiring a company that could get you there tomorrow. So it's worth considering.
This can even work if you are starting up. We raised finance for starting a business and, before we even embarked on implementing the business plan, we found one of the main competitors in the market was up for sale. After agreeing it with our investors, we made an offer and acquired the company for a good price. Within 6 weeks we had a fully fledged business completely up and running, with an established name, services, customers, offices, staff and a year's worth of marketing already done for us. It jumped us at least 18 months ahead in our business plan and probably saved us over £500,000 in costs.
If you already have a business or you're thinking of starting one, then it's worth taking some time to investigate the opportunities in your chosen market and seeing what's available. One of the biggest advantages of buying a business is that it can bring a ready-made customer base. And whatever business you're in, you'll know that the costs of acquiring customers can be significant.
You can find businesses for sale through the internet and through specialist business brokers. You can also find them by talking to others in your industry, including your competitors.
You'll most likely need help from professional advisers when you decide to actually make an acquisition but your initial investigations can be done at a low cost and with minimum disruption.
It's up to you whether you choose to look for a business that's smaller, the same size or even bigger. It really depends on what your plans are. You may even find yourself inspired to move into a different industry when you find what's available.
Of course, acquisitions don't come without their own special challenges, so you'll need to understand the risks and rewards involved in buying someone else's business. However, if you set clear objectives and create a solid action plan then it's something that can really work for you.
Make a list of what you want in your own business. This could include more customers; more products or services; bigger offices; more experienced staff or any other items specific to your needs.
Then start your search for companies that fit your criteria and at the same time calculate how much it would cost you to achieve all your objectives by doing them yourself from scratch. Once you find some companies that match what you want, you can start making approaches and offers. Your calculations will show you how much you want to pay by comparing what the acquisition would bring you against what it would cost to build it yourself. And you may be able to pay a lot less than that.
Just imagine, after reading this, you could find yourself in 6 weeks time with a business twice the size of your current one and with many more opportunities to explore.
Being an entrepreneur was never easy. Starting a business up from scratch is one of the most difficult and complex things to do. If anyone ever told you that it was easy, then that person is wrong. But now, a lot of would be entrepreneurs are looking at a much safer and hassle free option of buying an established business. The reasons for this are many. It reduces the hassles, the anguish and the pain by leaps and bounds, getting finance is easier etc. But buying a business is also an equally challenging task. If you go wrong, then very soon you will have made a huge financial mess. You need to ask a few questions to yourself to ascertain whether the business that you are about to buy is right for you.
You as the new owner Besides the finance, there is a lot more at stake when you buy a new business. Your reputation for one, your ability to run the new business and your working capabilities are all at risk in starting a new venture. When you buy the new business, you need to understand that the focus of the business shifts completely upon you. You need to be qualified both technically as well as in terms of experience to run the business effectively. A business can be really stressful as you might have to deal with difficult employees, uncertainty, adversity and lastly, loss. The faster you are able to gauge your expertise, the easier it will become for you to determine whether the new business is right for you.
Background check This is one of the most important steps in securing a good and strong business. You need to conduct a complete background check of the business that you are about to takeover. Does the business have a positive cash flow? Valuing the business is a part of this background check. A business valuation analyst will be able to help you determine the actual value of the company. The valuation of the analyst is based on experience and professional standards. The analyst does not take the financial details of the company into consideration.
Finding the right business The Merger and Acquisition firm will help you to find the right business for you. These guys are intermediates or middlemen. They can be categorized into several categories based on the kind of business transactions that they can handle. For example, a broker can handle a business transaction for companies with sales under $5 million. The broker would nevertheless love to handle the transaction for a company with sales exceeding $20 million but neither do they have the competency nor the expertise to do the same. So when you seek the services of a M&A firm, make sure that you choose the right one based on their expertise.
Planning A proper plan in place will let you complete the entire acquisition deal in no time at all. If you run an aggressive plan, then it should not take more than three months for the complete acquisition to go through. So sketch out the plan and execute it in proper order.
Both Andy Warren & Williamking are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Andy Warren has sinced written about articles on various topics from Family Concerns, Finances and Debts Loans. Andy Warren is the Managing Director of Marshall Keen Ltd. He is a chartered accountant, successful CFO and entrepreneur with extensive experience in M&A, Corporate Finance, Business Growth and Exit Strategies. Marshall Keen. Andy Warren's top article generates over 18100 views. to your Favourites.