A lot of young entrepreneurs believe that starting their businesses right from scratch is the only way to succeed financially. Most businessmen/businesswomen think to start their own business is the only option available to them, meanwhile, it is not so. They don’t know that taking over or acquiring an already established business is much profitable and easier than starting from scratch.
A few business tycoons gave the business advice that buying a business is much more profitable to them than starting a new one. In terms of costs, personnel, management, and time efficiency, buying a business is far better than starting from scratch. Besides, buying a business puts your managerial and leadership skills to test, it provides a clear opportunity to make huge profits and it skips the “risky—startup” stage. Enough of that being said, whether you are buying your first business or making an acquisition to expand your existing business, it is important to make the right choice. Here is some business advice you should consider when buying a business.
Step into a liquidating business
As a business consultant, my first buying a business advice to you is to step into a failing business because you can take over the business easily. Quite a lot of rational business owners tend to walk out of their failing companies thereby leading to dilution of ownership which is an opportunity for you. You are going to be saddled with the responsibility of restructuring the business; this can be done by stopping all payments, taking business advice from the management, assessing the credit status of the business, devising a repayment plan and making strategic decisions regarding the business’s debtors.
Use the Vendor Financing strategy
If you feel you can’t handle a failing business and you want to opt for a profitable business, you should use the Vendor Financing strategy. Vendor Financing is also known as deferred loan. It is a form of lending in which the seller lends you the funds you need to buy the business. The amount is thereby repaid overtime with interests. This is perfect in a situation whereby the seller wants to retire. 37% of businesses in USA Today are bought through Vendor Finance
3. Invest your skills and resources into the business
You may have the skills that will take the business to the next level. It will be profitable for you and the business to invest such skills, talents, and resources into the organization. For example, if you are a “tech guy” and you observed the business is lagging in the area of technology, it will be advisable to invest your technological skills and your resources into the business. This is my favorite buying a business advice because it allows you to work your way into the business. You can create a structure where you will be paid in equity shares or a percentage of profits.
Investing your skills and resources into a business is a win-win situation in the sense that you are being rewarded and also developing your skills.
Improve business efficiency