Right now, the wave of business acquisition opportunities in the U.S. is one of the most overlooked investment opportunities on the market.
For experienced business owners and entrepreneurs, now is a prime time to snap up businesses with tremendous value-add opportunities. With minor technological, operational, and organizational tweaks, experienced managers can turbocharge existing, stable, cash-flowing businesses into cash cows.
PROS
Why is acquiring an existing business such a great opportunity? There are so many reasons:
Established.
- It has an established and historical track record that lends itself to analysis and review.
- It has a customer/client base, established vendors, and suppliers that are all documented.
- Some have a physical location and already have employees, furniture, fixtures, and equipment in place. This saves you the time and headache of requisitioning these assets yourself.
- An existing business has a financial track record and established policies, procedures, operations, etc. A well-run business will have a financial history of the business that could be made available to a prospective buyer.
No learning curve. Someone has already suffered through hard challenges and overcome them.
Tired owners present value-add opportunities. Even if a business is profitable, an owner just might be tired of running it and with no children to take over, these opportunities present efficient business operators the chance to come in and improve efficiencies and put the business on autopilot.
Businesses behind the technology curve present instant upside. Many small businesses, especially ones owned by Baby Boomers are slow to adopt new technology.
With simple, affordable productivity and CRM tools coupled with Internet and social media marketing, these businesses can be brought up to speed quickly and improve income by multiples.
Easier to revamp a business than start a new one from scratch. Someone has already sunk all the capital and learning curve into a business and made it profitable. The only question is if there’s room for improvement.
With start-ups, you’re starting from scratch from the ground up. An existing business is “turnkey.” Just get in and go.
Starting a new business can be a crapshoot. No amount of research, time, or money invested, could eliminate all risk of starting a business from scratch. Some of the most successful billionaire businessmen and women in the world failed at one or more businesses before hitting it big.
Easier to attract capital. Whether you’re seeking bank financing or private capital, raising money is easier with an established business – especially one with a track record of profitability.
Securing funding for a startup can be difficult. SBA loans and most traditional banks and lenders want to see a minimum track record of operations and financial results.
Funding established businesses are considered a lower risk for both banks and private capital when compared to new businesses. It’s easier to forecast future financial performance and the company’s ability to repay loans or investors when there’s already an established record of financial performance.
CONS
Acquiring an existing business isn’t without risk. Potential pitfalls can include:
- There may be a steeper learning curve than expected.
- There may be hidden problems not caught in due diligence.
- Dated technology and processes require more capital than anticipated.
- Having an established staff, suppliers, and processes in place can be a two-edged sword if there are problematic employees or unreliable suppliers that need to be dealt with.
There might not be a better time in history to buy an existing income-producing business.
There are so many advantages to acquiring an existing business over starting a new one. And with millions of Baby Boomers set to retire, the pace of businesses being offered for sale is at breakneck speed presenting potential buyers with a wide array of options.
Acquiring an existing business is not without pitfalls but with proper due diligence and analysis, many of these potential risks can be mitigated.
In the right hands of an experienced organization with high-level skills, infrastructure, personnel, and operational efficiency; under-performing and technologically deficient businesses can be quickly be brought up to speed and reward buyers with consistent cash flow from a turnkey business.
