Multiply and conquer: acquiring a business
As a successful business owner, do you want to continue to build your business organically or drive capital growth through new business acquisitions? While your finances will certainly help direct your decision, so should your goals.
Reasons for acquiring a business
- You may wish to either expand your business interests into a related market or an entirely new market altogether, in turn diversifying your investments so that none of your eggs are in one basket.
- An existing, successful business will have its processes and staff working efficiently so that you do not have to build a second business from the ground up.
- A less than successful business will be cheaper, and allow you to transform it if you see that it still has the potential to meet a market demand.
- A strong performing staff who clearly drive the growth of the business.
- You may want the consumer/customer base that a business has a monopoly on.
- Lastly, you may want to acquire an existing business for its property and value of assets, especially intellectual property.
What you get when acquiring a business
The most important thing you receive? Instant access to a functioning and (hopefully) growing business. And with this comes the responsibility on your behalf to respect these processes, and the staff that implement them, and learn from them.
With your negotiations with the vendor, be sure to be clear why you are buying the business and if it is the staff expertise you value, then you want to be sure that you will not see a large exodus of staff the minute you sign the papers. Be sure to check out our insights into buying a business with existing staff.
If you want to build and shape a business then this takes time, and this is where you may decide to ‘build’ a business from scratch. If you do not have the time or the inclination, then you may prefer the instant rewards of acquiring a business alongside that which you have already built from scratch.
How will you run the business?
Do you want to acquire a business to eventually be absorbed into your existing business or do you want it to run under its own brand? Knowing why you want to acquire the business will help drive this decision, as if you just want the property on which a business sits, you may not even want to keep it running. However, if you have bought an existing company for its potential for growth and its access to a particular client/customer base as well as its processes, then you may not want to restrict its ability to function with its existing branding.
If you do decide to get rid of your acquisition’s branding, do so after a period of time in a strategic way, allowing you to transfer customer loyalty to your own business without losing any good will.
Tips for getting started when acquiring:
- If possible, create some form of insurance/penalty in case the vendor pulls out of the deal after certain preparations have been made. You don’t want to be stuck with solicitor’s costs for nothing.
- Acquire all digital assets. Today, this means social accounts (especially passwords), social calendars, website domains and their status. In other words, be sure you have the means to continue the processes that have attracted you to that business in the first place.
- If integrating a business into your existing brand, devise a strategy for this process. Will you slowly introduce employees across the two businesses or will you make it a sudden process. Remember that you don’t want to duplicate on expenses, staff or processes, so be quick to make the necessary cuts.
- Consider creating a short-term retention plan for the staff that have just lost their business owner and are now looking to you as their new leader.
- Will you have to upskill your workers and will this cost money?