Throughout the lifetime of your business, it is very likely that there will come a time when buying another business is an option for you. Buying another business can seem like an overwhelming process, but with the right mindset and preparation, the process should be simpler than you think. Here are a few questions you should ask yourself before buying a business in 2022.
Buying another business isn’t just about having enough capital to do so, it has to make sense from every angle of business sense. In other words, you want to specifically know if the new business will increase your market share, shareholder value, and competitive positions. As well as whether an internal expansion, franchising, or licensing venture makes more sense than a new acquisition.
Acquiring a new business will require integrating both sets of staff, deciding which management and executive positions to retain, and how to go about meshing the two respective business plans. All of this will take time and money, so make sure it is without a doubt the best move for you and your business financially.
Acquiring a company means that cash flow will be drained in the short term because of the increase in operational and financial obligations. You will find yourself paying much more in salaries as well as a new set of loans that may need to be paid off. These are just two out of the laundry list of new costs that come with acquiring a new business.
Creating an index of possible businesses to acquire and simulating how each would affect cash flow using a computer program is a great way of visualizing how the future could go, and should heavily influence your decision. Finding a new method of financing is another tip supported by the majority of entrepreneurial experts. Seller financing, term debt, mezzanine, or minority equity are all valid techniques for achieving new financing, but every business is different and you should take your time deciding which to choose.
Acquiring a business is no different from buying any number of consumer items, as there is always a chance that something is not as it seems. A company could be, as accountants say, cooking its books, have lawsuits in progress, or otherwise be lying about some of its finances. Do not overpay for the company you buy! Spending the money for a due diligence process should guarantee a fair price is established. Through this process, you should find out why the owner is selling, who the employees are, and what the current trends are in the region and industry the company inhabits.
As stated earlier, simply having enough money does not mean that the acquisition makes sense. Any business acquisition will have ramifications for your current company. Luckily, nobody knows the business like the owner, you. Using your in-depth knowledge of your company’s finances, personnel, and industry, you should be able to create a formal post-merger integration strategy. The first few months are the most important time for ensuring both businesses thrive post-merger. The plan you layout will be the guiding light for both companies on the path to success.
Looking to become a business owner in 2022? At Murphy Business, we understand how overwhelming and complicated buying or selling a business can seem. Finding the right business to buy or the right buyer to sell to is a lot of work. That’s where we come in. Our experienced team will help you find the right buyer for your business or the right business for your buck!
Contact us for more information and connect with an expert today!