Buying into a business can be just as hard as setting one up from scratch. You might be going in 100% and are deciding on buying the whole thing. Perhaps you’re one of a consortium, or maybe you’re buying into a business owned by someone you already know. Whatever scenario it is, you need be careful, find the right business for you, and ensure that your money is as safe as possible all the while. Of course, everyone is different. Their needs and wants in regards to the business vary wildly. Some may want to buy and hold long term, while others will want to buy, increase sales and profit and then flip for a quick profit themselves. Whatever the case, due diligence is needed in all situations. Here are some top considerations you need to think about when buying into a business.
Find A Great Business Model
Some business models work and others don’t. The trick is finding ones with a novel approach. Ones who have found a unique angle to tackle the relevant market. There are some real future forward business models out there. The Beachbody Company are a great example due to their continual innovation over the years, they’re also a good example because fitness isn’t something which is going to fade away anytime soon. Similarly, you’ll want businesses which tap into the social consciousness. Think about businesses with green energy at the forefront. Look at how well Tesla has done over the last few years. A simple look at the stock market data will tell you all you need to know about it. A business model can be replicated, it can be changed and morphed into what you want once you’ve taken over, but for a running start you’d be far better off just finding one which has a decent business model right off the bat.
Go Wide With Selling Platforms
If the business only sells off its website, you need to spend a whole chunk of time looking into ranking and SEO. If this is already optimized and in good condition then you don’t need to worry as much, but if it hasn’t you may be in for a shock. You can get around this by buying a business which casts a wide net. One which has a selling account on Amazon, for example. Selling there means you get less profit per sale due to fees etc but you can really make a killing if you rank the account with an fba agency or perhaps a freelancer who has experience in ranking sites. It might be that you get most of the sales straight through social media with the odd referral back to your main website. Whatever the case, look for selling platforms beyond the business website. Sure, you can implement these yourself when you take hold of the business, but at the same time finding one with this in place will save you time and likely a chunk of cash.
Focus On Evergreen
You want to find a business that’s evergreen. It means something which will have just as much pertinence years down the line that it does now. Something that’s not overly reliant on current tech. For example, buying an SaaS business (Software as a Service) at the moment might be great, but when that software runs out of steam, do you have the technical know how to implement new software? Overnight the whole business could be made redundant if something bigger and better came along. It happens more than you think. Sometimes these issues will be glaringly obvious to you. However, other times you might have to dig under the surface a little. You need to look into the business in depth to pick them out. Don’t make the mistake of overlooking something like this. What’s good now, may not be a few months down the line. Even if it’s turning over a healthy profit, you need to dig and dig deep. Focus on evergreen.
Manage Something For Someone Else
Sometimes, people don’t like to manage their own business. Or, at least they don’t like to manage certain elements of their own business. There are whole industries set up around this. Think about SEO, and how many business owners outsource that to others. If you can buy into one of these businesses you know you’ll be onto a winner. There are so many these days. You can manage someone’s social media account, or perhaps you’d look at doing the outreach, or managing supplier flow. If you can buy into a business that fills a vital need for other businesses then it’s going to be perfectly evergreen throughout. It’s about finding those businesses which really address a problem in a respective industry. Something which is tedious, technical, but always necessary.
Share The Risk
Buying into another business is always going to be a bit of a risk. Even if the opportunity looks perfect. Even if you feel like you’ve researched every possible element of it. Sometimes, that risk might just be too much to bear if you’re going it alone. It’s why sharing the risk is a good idea. Perhaps you can buy the business with a friend, or a relative, or someone business savvy. If you’re both investing, the risk is halved. It’s as simple as that. You get bonus points for finding someone who can bring something to the table other than money. Say you’re buying a website. Can they write? Then you’ve got someone who can crank out killer blog posts saving you money and adding further value to the website. Sometimes, having a silent investor is great because you know that they’ll just let you get one with it. Sometimes, heads clash, so it’s always good to ensure you feel comfortable with the person you’re going into business with before any contracts are signed and money is parted with.
Research Competitors Before You Buy
Emphasis on the word “before”, you buy. Don’t buy the business and then start looking. Checking out the main competitors in the relevant field ensures that you can get a feel for what’s going on in the industry. It also allows you to ensure that the business you’re buying isn’t completely defunct or redundant due to competitor activity. Just think how much more you’d have to invest to come up to line with them, after buying the business. That’s a lot of cash. Look at what they’re offering, check out the services. Are they better? If it’s a content website you’re after, for example, does their content rank way higher than yours. Will it be pretty impossible to catch them up. Maybe it’s the other way around. Can you see a chink in their armour to exploit and get around, thus finding the perfect opportunity to increase business worth down the line. Always research competitors as best you possibly can.
Have More To Further Invest
Buying a business, or even a stake in a business, is great. But at the same time you need to be able to continue to invest in the business. It has to be able to last. Buying in for a huge chunk, with you then having nothing else left, is often a recipe for disaster because you won’t be able to effectively improve the areas you want to change. There will be areas, even if the business is doing relatively well. Try to take some money with you. Sure, there might be other options, like applying for a business grant, or waiting for a short time and using current profit to reinvest. However, if you really want to land with a splash and get straight into it then try to ensure you have money to invest in the actual business, as well as having the money needed to buy into the business itself.
Find Out About The Old Owner
So what kinds of skill sets do they have? The business may be rolling along nicely completely due to the competencies of the current owners. Are these competencies you don’t have, meaning the profitability of the business will pretty much fase as soon as its sold? It’s certainly something to think about. At the same time the opposite might be true. It could be that they had a missing skillset which you can easily fill, thus immediately adding intense value to the business with you driving sales. Finding out about them, what they do, how involved they’ve been, what other projects they’ve got etc. can really inform you and can help you devise a plan regarding how to take over the business. People will approach this in a different way. Perhaps you can just have an open and honest chat with the current owner, or maybe you want to investigate. Check their LinkedIn profile. What qualifications do they have, what have they done recently and where does their expertise lay? Maybe you do a bit of both. Whatever you do, and however you do it, just make sure you set aside some time to look into it.
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