The acquisition of any business is no impulse buy. There are myriad issues to contend with before you can even think about signing on the dotted line.
Despite this, countless companies and investors go through the process every year. This is no doubt down to the fact that in spite of the complexities involved in buying a business, it’s still far easier than launching a brand new company.
With so many businesses up for sale though, how do you discern the rough diamonds from the sparkling cubic zirconia? We take a look at some of the most effective ways to discover a valuable business.
For most companies, the owner is an important part of the overall machine that keeps the business running. For some, however, the owner IS the business, and without them, there really isn’t much left. Think about a well-connected football agent that takes all of their contacts with them when exiting the agency. The purchaser of this business would practically have to start entirely from scratch again.
If you can see that the business can run itself well without the need for the owner’s input, then you’re far more likely to make a success of it.
Operating for a long time doesn’t necessarily guarantee a company’s success, but it does provide a buyer with less need for marketing.
While you should still plan to market the business, the main task has probably already been achieved: make people realise you exist. Just by virtue of existing for a few years, it’s likely that locals have noticed your premises, or that customers have mentioned your service to others.
With this visibility acting as a solid base to build your advertising efforts on, you can start much further along your marketing journey than you might have to otherwise.
Some businesses are valuable purely because of their assets. Because of this, it’s important not to dismiss out of hand any companies that don’t immediately seem like a compelling acquisition.
Vehicles, specialist equipment, and even skilled staff members can turn a good investment into a fantastic buy.
Be sure to take a look at the contracts that any business has in place with its suppliers. Some have better relationships with them than others and might enjoy a superb rate that can be transferred over to you once the business is purchased.
Older companies are also more likely to still be on old tariffs for certain suppliers that can’t be offered to new clients. These older rates may be significantly lower than the current prices, so can also provide added value.
Equally, there may be some contracts with high-worth clients that bring in a lot of money. Think about how much time and effort you would normally put into securing such contracts and use this in your reckoning when it comes to estimating how much you’d be willing to pay for it.
While local businesses have always known the importance of word-of-mouth mentions, online companies are now equally in need of good reviews.
If the business you’re looking at has fantastic Trustpilot/Google reviews, or otherwise enjoys a strong reputation among its community, the boost this will give you can be invaluable.
Of course, the main way you can ensure a successful acquisition is to enlist the help of a specialist service such as Forbes Burton.
With so many legalities and complexities to consider, it’s far safer to hire the help of an acquisition expert to make sure that you avoid any problems, both right now and further down the line.
