Business owners have many different reasons for wanting to buy another business. Some owners want to grow by acquisition. Other business owners want to diversify. Regardless of the reason, all business owners have the same overall goal which is to increase revenue and strengthen the financial health of their business holdings. Buying an additional business is a different process when compared with buying an initial business. There are three things that established business owners need to do when buying another business.
Determine the overall business objective
In order to find the right business to buy, owners need to know their overall objective for the acquisition. Is it to increase market share? Does the business want to add new products? Is it time to enter a new market? Some business owners may feel ready to buy a new business but are unclear on what their objective is. There are few things owners can do to figure this out.
- Review the existing business plan to determine where an acquisition would help in achieving more growth.
- Determine what areas of the existing business could be further strengthened.
- Determine where economies of scale could be improved by purchasing another business.
This can be a challenging process. One way to determine the right objective is to work with a Certified Business Intermediary who has experience in helping companies to grow by acquisition.
Put together an acquisition plan
Most businesses have a general plan in place when they are looking for another business to buy. This isn’t enough. Successful acquisitions are guided by a strategic plan. According to a recent report from Business Development Canada, “companies that followed a structured acquisition process were 94% more likely to experience high revenue growth after the acquisition”. The acquisition plan should be drafted before the owner even glances at a business for sale listing. The acquisition plan is important for internal and external stakeholders and keeps all involved parties focused on
- The objective for the purchase,
- The timeline and budget, and
- Individual roles and responsibilities.
In addition to providing the framework for the initial stages of the acquisition, the plan should also include a strategy for making an offer on a business, the ownership transition phase, and developing a target operating model for moving forward.
Work with acquisition experts
Buying another business is a complex transaction that requires a great deal of forethought, planning, and strategy. Business owners should have an experienced team of acquisition experts in place. The right acquisition team will be there from the initial stages, when the business is determining the objective for the purchase, through to the post-merger integration.
Professionals that will help an acquisition be successful, both initially and over the long-term, include
- Certified Business Intermediary,
- Financial advisor,
- Accountant, and
- Lawyer.
It is important to seek out professionals that have recent experience in facilitating acquisitions, which means business owners may need to look beyond the professionals they have existing relationships with.
Strategically purchasing another business is a great way to grow but only if it is done correctly. Consulting with a qualified business broker at the beginning of the process is the best first step a business owner can take. Contact Acuity Business Group today to learn more about how we can help!