Entrepreneurship through acquisition is continuing to be a popular route for many individuals who wish to grow within markets and industry but do not wish to start at step one.
Business acquisition means you are also acquiring its loyal customers, knowledgeable staff, established leaders, ready processes, and successful service or product offerings. You can start with two feet already on the ground.
However, business acquisition is not just choosing a profitable company and hoping for the best. It takes a good understanding of yourself and your readiness to ensure you are setting yourself up for entrepreneurial success.
Assess Your Financial Readiness
Buying a business means you are, well, buying a business. You must have the appropriate capital and risk tolerance in order to consider such a large investment.
This is your chance to determine how much capital you have available to put toward a business and if you need to explore other financing options. Additionally, you want to assess your debt capacity to gain a better understanding of the debts you could potentially be acquiring with the business, and if that is something you can handle.
You want to spend this time assessing your financial situation as well as the businesses you hope to acquire to ensure they align.
Understand Your Personal Motivations and Goals
You do not want to conduct a business acquisition simply because you can. Having the capital is one thing, but having motivations and goals within that market and industry is another.
You want to understand your personal and professional goals for purchasing a business. This is your chance to answer “why?” When you do, you can better narrow down what type of business you want, in what industry, how hands-on you wish to be, and how you see it growing in the coming years. These goals will shape your decisions and ensure you set yourself up for success, rather than simply going through the motions.
Evaluate Your Knowledge and Know Your Gaps
You could purchase a company right in the middle of an industry you have spent your whole career in, but that does not automatically mean you know everything about running a business within that market. You will inevitably encounter knowledge gaps, and it is essential to understand what they are.
Whether they are gaps within the act of running a business or the industry itself, identifying your knowledge gaps can help you move forward in filling them or finding individuals who can complement your expertise. You want to go into this venture ready and running, and making sure you have your bases covered will help with that.
Do Your Due Diligence
Each business will bring different aspects to the table. You can’t assume that because they have the same number of employees, make the same amount of profit, have similar services, or are in the same industry, that they will be the same to you as their owner. It is time to do due diligence.
Due diligence is your chance to take a deep dive into the business and ensure it aligns with your desires for a company and goals for the future. You want to assess financials, legalities, and processes. The business might look great on the sales pitch, but due diligence will tell you the truth.
Discuss With the Necessary Advisors and Professionals
You do not have to go about business acquisition alone, and I advise against it. This is a significant step, and you want to ensure you are taking the right moves in your entrepreneurial venture.
This is the perfect time to discuss your options, questions, and concerns with professionals such as legal counsel, financial advisors, accountants, or a business advisor. If you want to be ready to purchase a company, speak to those who can inform you if you are missing anything or have a few more things to do before making a decision.
It takes time to assess if you are ready for business acquisition, but it is necessary to ensure you are setting yourself up for entrepreneurial success. If you have questions or would like to determine if you’re ready to purchase a business, contact me.