5 things to consider when buying an existing business

Finances, Management

5 Things to Consider When Buying An Existing Business

March 10, 2017

Let’s say you’re a CNC shop owner looking for new ways to compliment your existing business. Or, perhaps, you have an itch to add a new business to your portfolio. In either case you can start from scratch, or acquire an existing enterprise.

Although it appeals to the entrepreneurial spirit, startups can be costly and time-consuming ventures. Which is why you may wish to consider buying an existing business. Fact is, today there are a great many opportunities to acquire a successful business. One reason is that many small businesses are owned by aging members of the baby boom generation who are ready to move on to the next phase of their lives. However, while now is a good time for buying businesses, there are a number of issues you should think about before jumping into the market. Here are five:

  1. Is it really a good fit? Two ways to look at this: (1) does it compliment your existing shop in such a way that both will benefit? (2) If you’re looking at a second business that has no relation to your current shop, are you sure you have the skill sets to run both? While basic business acumen is highly transferable, it can take a great deal of time and effort to understand the complexities of a business that’s totally unlike your current one. Many a successful business owner has failed spectacularly venturing into a field they knew little about. Just because a person can run a successful CNC shop doesn’t mean they will have a successful restaurant – even armed with Mom’s secret recipes.
  2. Cast a wide net. Don’t depend entirely on pursuing online marketplaces or auction sites. Use your industry contacts including suppliers, associations, legal and accounting advisors to uncover opportunities. If looking outside of your current industry, look for a reputable business broker or Mergers & Acquisitions advisor.
  3. Due diligence. We know it’s important, but it’s also so easy to get caught up in the moment and trust your gut. Don’t do it. Look into all aspects of the business, insist on complete access to the books and make certain there are no unknowns that could cause you grief down the road. Hire experts, if necessary, to investigate. You may like good old Harry who is willing to sell to you on the basis of a handshake, but wait to shake his hand until after you’ve done your homework.
  4. Can you make the new business better? Buying an established, successful business means having a new source of income, which is great. Unfortunately, you also have the expense of paying for the new business. Therefore, it makes sense to improve the revenue stream by refining existing processes, entering new markets or introducing new products/services. Simply maintaining the status quo means it will take substantially longer to realize a return on your investment.
  5. Can you afford the journey? No matter how hard you try to avoid it, the process of finding and acquiring a new business will take your focus away from your existing shop. This means you’d better have both processes and staff in place to keep your cash cow healthy while you’re working on the new acquisition. If your shop isn’t functioning like a fine timepiece when you’re not around, it may be wise to invest in your existing business before looking for another.

Of course, you can also increase your existing shop’s revenue by adding new capabilities or upgrading your current equipment. The Gosiger team can introduce you to the latest manufacturing technologies and help you maximize your ROI. Contact your nearest Gosiger facility to learn more.