Thinking about acquiring a business?
Whether you're an ambitious entrepreneur or a seasoned investor, purchasing an existing business can be exciting yet daunting.
It’s a major decision that can have significant implications for your financial future and operational strategy.
In this article, we'll walk you through the pros and cons of business acquisition, giving you a well-rounded perspective to help you make an informed choice.
Plus, we’ll discuss how we can assist you in building a successful business from scratch if acquisitions aren’t quite right for you.
Pros of Business Acquisition
Here are the key benefits that come with acquiring an existing business as opposed to building one from scratch:
You inherit an established market presence
One of the major benefits that come with getting an existing business is that you’re gaining an already functional business.
It has an already established presence, a loyal customer base, and a recognizable brand.
This simply means you’ll be leveraging an existing reputation which helps you significantly reduce the time and effort you’ll take to attract customers if you were to start from scratch.
You enjoy instant access to revenue
One thing every entrepreneur secretly wishes for is to start a new business and generate revenue immediately.
Unfortunately, this can never happen in a real-world scenario. With a new venture, the income tends to be uncertain and slow to build up.
However, if you buy an already existing business, you can make your desires come true, as you will start enjoying revenue instantly.
This is made possible by the fact that the existing businesses come with already-established sales and revenue flow.
Needless to mention, this will give you immediate financial benefits while also stabilizing your cash flow right from the start.
An existing business comes with an excellent built-in infrastructure
Another great thing about that existing business you plan to acquire is that it has an established infrastructure. This includes everything from the operation systems to software and well-trained staff. Not to forget the physical assets.
If you think about it, this will greatly save you the considerable amount of time and pain of setting up all these elements that make a business run like a well-oiled machine from scratch.
Escape the startup matrix
Building your own business from the ground up isn’t the easiest thing to do. It’s quite risky. Even worse, you’re never guaranteed success and your new venture may face substantial hurdles along the way.
The flipside holds for acquiring a business. You get to own a proven business model with an operational history, greatly reducing most of the risks tied to new startups.
In simpler words, buying into a venture with a proven track record helps you minimize the many uncertainties of new startups.
Plenty of growth activities at your exposal
In most cases, acquisitions also act as springboards for expansions. How?
By buying an established business, you might easily identify opportunities for diversifying your product lines, enhancing your services, or entering new markets.
The business’s existing framework will serve as a solid base for scaling and increasing your revenue.
Cons of Business Acquisition
And here are some disadvantages that may make you rethink acquiring an existing business…
High initial investment cost
One of the major drawbacks of acquiring a business is that it costs you an arm and a leg. Depending on what type and size of business you’re looking at, the upfront cost can get quite high.
Unfortunately, there’s no way around this as you don’t expect someone who has built their business to sell it at anything below its value.
Probably the only important thing you can do here is ensuring the business value justifies the seller’s price tag, and that you’ve got the financial resources to cover it.
The existing problems become your problems!
No company is perfect. Not even the one you’re looking to acquire. As such, buying into that business means you'll also be inheriting any imperfections it comes with.
Some of these issues may include outdated technology, unresolved debts, and operational inefficiencies.
The only way you can save yourself here is by conducting an in-depth assessment of these issues during the due diligence process.
This will save you from unexpected surprises and give you peace of mind as you prepare to take over the running of the business.
You may end up overpaying!
As we mentioned above, business acquisition requires a high upfront cost. That said, you might fall victim to overestimation of a business, which can lead you to pay more than the actual value of the given business. This isn’t good as it hurts your return on investment (ROI).
Fortunately, this is something you can avoid. We strongly advise you to conduct a comprehensive evaluation of the business and even seek expert advice to ensure you make a sound financial decision.
In-depth due diligence can be lengthy and complex
I know I know…we’ve just said that you need to conduct detailed due diligence of a business to ensure you only pay for its worth.
However, you should also keep in mind that the due diligence process is quite detailed and time-consuming (it can extend to days, weeks, or even months—depending on the type of business you’re eyeing).
You’ll need to scrutinize the company’s financial records, operational procedures, legal issues, and so on.
Nevertheless, this thorough examination is necessary to help you avoid potential pitfalls associated with acquiring existing business.
Bad reputation and culture
The business you want to acquire may also have a damaged reputation, and this may be a huge challenge for you as a new owner.
Acquiring a company with a poor reputation in customer service means you’ll need to work extra hard to exceed your customers and hopefully mend this broken relationship with them.
Part of detailed due diligence involves thoroughly reviewing what kind of reputation the business you’re looking to buy into has.
Check what people have to say about the internet. If they have been around for long, then they must have been mentioned somewhere on the web.
How Trend Hijacking Can Help
If the thought of acquiring a business seems overwhelming or if you're considering alternative/complementary paths, then our Done-For-You Program might be just what you need.
Our program helps you build an online business from scratch, where we handle everything on your behalf from setup and launching to scaling and continually managing it.
With our expertise and automation solutions, you can start a new venture with confidence and minimal hassle.
Want to learn more about our program? Click here to book a free call with us and let’s explore how we can help you build your business from the ground up!
Closing Thoughts
Weighing the advantages and disadvantages of acquisition carefully can help you make a more informed decision on whether to acquire an existing business.
Some of the top benefits of business acquisition include an established market presence, immediate revenue, and a built-in infrastructure.
However, there are key concerns involved in the trade such as high costs, inherited challenges, and a complex due diligence process.
By understanding these factors, you can make an informed decision that aligns with your investment goals.
If you're considering the alternative option of starting a business from scratch, we're here to help you navigate the path without the usual headaches!
We have designed a comprehensive automation program that handles every aspect of your online business on your behalf while you enjoy the results.
Ready to see how? Book a call with us here and let’s start your journey!
