Buying a Business to Expand Your Existing Business

Picture of Gina Blitstein Gina Blitstein combines her insight as a fellow small business owner with her strong communication skills, exploring topics that enhance your business efforts. That first-hand knowledge, matched with an insatiable curiosity to know more about just about anything, makes her a well-rounded writer with a sincere desire to engage and inform.

Buying a Business to Expand Your Existing Business

One highly effective way to expand your business is to acquire another, related business. While this sounds like a straightforward plan, there’s a lot to consider beforehand, it can prove to be a lengthy, complicated, and nerve–wracking process. Let’s discuss some things to bear in mind before and during the acquisition of a new–to–you business.

Before You Buy

Find clarity and purpose. Consider what it is you are hoping to achieve with your new acquisition. Are you hoping to gain a more attractive location or a larger or better facility? Are you looking for access to existing equipment or specially trained employees? Sometimes, acquiring their customers as your own is well worth the price of buying the business.

Mind the money. Research how much businesses in your field, in your locale, of the size you’re looking to acquire are selling for. Determine how much you are willing and able to spend on acquiring a new business. Have the details of your financing figured out so when you do find a business to buy, the sale isn’t held up because you can’t access your funding.

Research potential candidates in your preferred area. Some businesses for sale may be listed in an industry publication or from a broker, but don’t stop there. If you discover a business that fits the bill, make an appointment to speak with the owner. The business may not currently be listed but you may be able to put a bug in the owner’s ear. The allure of an attractive buyout may convince an owner who hadn’t even considered selling to think about it seriously.

Plan out your new business in detail. Think long and hard about how your business will operate once the expansion takes place. Will it take on new offerings? Will it retain some – or all – of the employees of the acquired business? How will they be integrated with your existing staff? Will you need to find a larger facility in which to run the larger company?

Be prepared for the influx of new customers. The whole reason you’re expanding is to get more business – so do what’s necessary to be prepared for the deluge of customers. Are you adequately staffed? Do there need to be training or staff meetings? Do you need to pump up production on products you manufacture?

During the Process

Do your due diligence. It’s detective time! You will want to learn as much about your potential new business as possible to make an appropriate offer – for both you and the current owner. For this process, it may be prudent to hire a lawyer and an accountant to help you collect and assess data about the company’s financials, earning potential, condition, standing in the community, treatment of employees, customer satisfaction and such.

Be mindful of how emotional selling a business can be for the current owner. The current owner may well have spent decades building the business. It’s her pride and joy; understand that to have someone asking probing questions may feel quite threatening. She may be downright insulted at the price you determine the business is worth. Demonstrating that you are sensitive to how she may be feeling will help you forge a better professional relationship with her.

Walk away if the deal doesn’t feel right to you. If at any time you don’t feel completely convinced that you’re doing the right thing by buying this business, don’t. Patience is your ally in this arduous process; it’s a big, bold move and you want to make it wisely. You may have to "kiss a lot of frogs" before one turns into a prince. According to Forbes,"Statistics show that before finally signing the share purchase agreement, you will have looked into over 100 teasers, done preliminary due diligence on 15 targets, and signed 2 to 4 letters of intent."

Keeping these considerations in mind can help you buy a business that will expand your company’s reach with confidence.

Would you purchase another business to expand yours?


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