A Step-by-Step Guide for Small Business Acquisition
We have all heard the news when Mark Zuckerberg, the co-founder and CEO of Facebook, developed WhatsApp in 2014. Even though WhatsApp was thriving in various countries, 19 billion dollars is an amount too big to refuse. You do not even need to be as influential as Zuckerberg to acquire another business. In fact, you don’t always need cash, credit, or experience to achieve a profitable, and lucrative business.
If you are interested in purchasing a small business with a respectable reputation and an established customer base, you need to learn about the process and every step involved in it.
Are you shocked?
Well the business achievement is an efficient, productive process, and if you are smart enough you can find businesses that are likely to increase in value within a year.
If you are interested in purchasing a small business with a respectable reputation and an established customer base, you need to learn about the process and each of the steps involved in it.
Here are the steps we recommend you follow if you are considering a purchasing a business
1. Determine what exactly do you want:
Before you prepare to initiate the purchase of a business, you need to identify what you want to achieve. Mostly, small businesses with annual revenue of £1 million to £10 million are the best choices to consider. It is recommended to look for business that have very little investment competition, however it is always better to pick a industry that reflects with your interests and experience. Furthermore, you will have to decide whether you want the owner to train you once the deal is complete, or you want to hire another specialised profession to manage the day-to-day operation.
2. Evaluate the financial state of the business:
No business owner will be willing to share confidential information about their business with you unless you offer to sign a non-disclosure agreement. When you receive the go ahead from the owner, check out how much money is coming in and going out, and if the cash flow has remained constant over the last few years.
Go to the Online Algebra Calculator and review the files to have a better understanding. The idea is to ensure there’s enough profit to cover the cost of financing.
3. Financing the deal:
They are some financing options that don’t even require your own capital, and some business owners will even let you pay them back over a longer time period using the business profits. In some situations they may ask for an upfront payment, and you have the option to secure a loan from financial institutions that are meant for the purchase, these can use the business profits as collateral and are least interested in your credit. It’s surprising how negotiable the financing terms are. Usually, parties pay no more than 30% of the purchase price during the completion of the deal.
4. Explore due diligence:
Once you settle on a mutual agreement, you need to focus on due diligence. You should consult with accountants and lawyers and negotiate a fee structure that is dependent on closing the deal. It’s advisable to have talks with all employees to appreciate how the business drives, and to make sure that they do not leave once the deal is complete. It is important to create a successful and effective plan with all employees, and explain their roles as well as yours before developing anything else.
5. Respect the existing customer relationships:
Whatever plans you have in your mind for the business, it is important to admire the relationship they have established with the customers over the years. If something happens to upset the existing customers or make some decisions that damage the status of the business, you are going to be at the receiving end of a lot of annoyance. Even if you have acquired the business for its ability, not the product, make sure you take proper measures to withdraw the products without hurting the attitudes of the customers.
6. Don’t focus on insignificant issues:
It is advised to retain as many existing team employees as possible, as you may realise that every employee in the team plays an important key role in a small company. Losing a senior leader at the time of procurement can cause serious problems in a newly acquired company. Ensure that you don’t make changes in the processes that upset the employees to the point of leaving the organisation, and is recommended to avoid making any changes that don’t have any influence on the financial outcome of the company.
7. Keep the business owner by your side through the transition:
You need to have a clear understanding about the procedure to ensure you can implement it efficiently and effectively. The business owner can support you in getting a grasp on the business operations, they know how every employee of the team works, and they can guide you how things around the company perform. It could be worth considering a handover period, just to make sure that they remain around long enough to help you understand the business and all its essential aspects involved.
In conclusion
There are numerous ways to operate a business, if you want to remain involved in the day-to-day procedures or want others to let others handle the task for you, you now own a business, which is a valuable asset. With making the suitable decisions, you may get to achieve high significant returns as well.
Author bio: Shirley Brown is an entrepreneur who runs an e-commerce company with her partners. She has an MBA and is associated with Allessaywriter as a subject matter expert. She helps students with their CPM homework as well as the annotated bibliography.