While launching a startup company will allow you to influence every aspect of a business, it will be filled with endless processes, and you’ll be forced to chase more established, larger competitors in your industry.
However, acquiring an existing business will only require you to iron out a company’s weaknesses and build upon its existing strengths, such as its solid customer base, brand recognition, and fully trained employees.
Yet, before you rush in, you should read the below five factors to consider when taking over an existing company.
- The Right Choice for You
It is a smart decision to invest in an established business that complements your knowledge and experience to date. For example, if you have enjoyed a rewarding career in the construction industry, taking over an established restaurant probably isn’t an intelligent business move.
Playing to your strengths can ultimately ensure a company’s future success. For example, if you have an extensive background in finance, consider purchasing one of the many accounting firms for sale.
- The Reason a Founder is Selling Up
Make an informed decision by identifying why a founder is choosing to sell their business. While you might assume it is in bad financial shape, this isn’t necessarily the case. Many business owners often choose to sell for a multitude of reasons.
For instance, they might:
- Be dreaming of retirement
- Have lost passion for an industry
- Want to move onto a new project
- Have personal obligations that require their time and focus
- The Operational Investment
As a business owner, you will be responsible for directing the company’s growth and longevity. To ensure the survival of your business, you must be willing to invest both time and money into an organization.
For example, you might need to rebrand a business, provide better employee training and development opportunities, or purchase more efficient office equipment, which could range from brand-new computers and printers to refurbished Versant 180 printers and office supplies.
- The Previous Sales Records
Before you commit to investing in an established business, you must review a company’s sales records for the previous 36 months so that you can identify your potential return on investment.
To effectively review a company’s potential, breakdown the previous sales into categories, and analyze the amount of credit and cash sales to identify the primary revenue source. It will provide you will a solid indication of a company’s health and activity, and it could also help you to learn more about the different sales cycles a company experiences throughout the year.
- Full Debt Disclosure
It makes good business sense to discover all forms of outstanding debt a company currently owes, from business loans to unpaid invoices. The information could ultimately prevent you from purchasing an organization with a significant amount of debt.
You also should identify if the business is currently owed multiple outstanding payments from a client, which you could potentially recover once you take ownership of the company.
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.