IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Jesse Clark of Souful Travel (https://www.soulful-travel.com/):
The Right Investment: Tips for Purchasing an Existing Business
For angel investors, venture capitalists or savvy entrepreneurs, buying an existing corporation, LLC or other business can represent an opportunity to empower your existing portfolio and create opportunities for profit, but this is often a decision that requires time, dedication, and intensive business process management. If you’re considering taking on someone else’s venture and adapting it to the current marketplace, you’ll need to research ahead – here are a few tips to get you started.
Finding the Right Business
Finding a business worth investing in can be infinitely tricky, especially as there are so many registered entities unworthy of investment. As a buyer, it is crucial, therefore, to have a strict criteria and to exercise discipline in applying it. As a rule, you want to find a business whose products have a preconceived demand (meaning a market that is willing to buy its products), high profit margins, and a clear USP that separates it from competitors/serves an exclusive market.
It can often be worth using a brokerage firm to help you in your search for the right investment. These professional intermediaries can help you to evaluate companies, vetting and pricing a company, and assisting in their acquisition. The right entity is dedicated to ensuring that both buyer and seller can negotiate in “good faith” and fulfill their end of a bargain.
Due Diligence
Before considering an acquisition or merger, it’s important to conduct a rigorous background evaluation of the company, taking time to review critical documentation/data. As the purchaser, you want to be certain that potential risks have been identified and you and/or your team have conducted due diligence covering financial, operational, legal, and regulatory company aspects.
Negotiating
Prior to a business acquisition it’s important to seek an independent valuation that offers both parties some objectivity – this will help lend transparency to proceedings and dispel any unrealistic notions of a business’ worth. When it comes to the negotiations themselves, efforts should be made to keep the process as simple as possible – be sure to direct any offers or communications at the decision-makers in the target company, present your strategy and reasons of interest, and convey your knowledge of/understanding of the company in question, and handle any negotiations with delicacy. Remember, this process can be emotional and may require careful handling.
Business Adaptation
Upon acquiring a business, there will be inevitable changes required to optimize its performance. You may, for example, want to reconsider its structure – this could mean forming a Limited Liability Company (LLC) to reduce personal liability, provide tax advantages, and diminish the amount of paperwork you have to deal with. It could also mean restructuring your operations for improved efficiency – a specialized BPM strategy can help with this, allowing you to automate and optimize processes/workflows by analyzing the interactions between people, systems and data. This is typically a framework that involves regular monitoring and refinement in order to increase output.
It may also be necessary to change the manner in which your new business markets itself. This might involve re-branding using the latest online tools (such as logo or banner makers) that allow you to personalize images, add text, colors, and animations for use across social channels.
Market Adaptation
Sometimes the failures of a company relate to a previous inability to adapt to market shifts. As a business owner with previous experience, you can bring about the changes necessary for adjustment – these might include portfolio diversification, incorporating new services, expanding the business to new locations, or even replacing key personnel. Just be mindful that you may be inheriting an existing company culture and any major changes could be met with skepticism.
Finding and acquiring an existing business is no easy feat, especially when adjustments may be necessary to help it adapt to the current marketplace, but, with advanced planning, doing so may strengthen the rest of your portfolio and allow you to profit accordingly.
If you have questions relating to the content of this article, Jesse Clark would welcome the opportunity to answer them. Mr. Clark can be reached at (901) 425-7909 or jesse.clark@soulful-travel.com.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.