Growing your business through business acquisition

If you are looking to up-size your business, sometimes it pays to look outside of the square.

One of the most effective and immediate ways to up-size your business is to buy your competitor (ie. business acquisition). This method can also be one of the most cost-effective ways of growing your business and securing new customers. In addition to increasing your customer base there are also trained staff who understand the business and its customers, systems, and potentially a new culture. 

The decision to buy your competitor may be made for strategic reasons, as with the purchase of TradeMe by Australian Media giant, Fairfax, who paid $700m to secure a strategic foothold in the online auction and classifieds market. Over recent years niche market specialists and players like TradeMe have eroded market share from some of the more traditional advertising mediums.

The alternative is to grow your business slowly over time, and with effort you can improve existing systems to increase sales thereby creating a larger, more profitable and valuable business. 

Bear in mind that business acquisitions should occur as part of a strategic plan, not just because it is available. You will need to identify long and short-term objectives, desired personal, strategic and operational goals. Develop a profile of the type of business that would best suit your needs; it can be a good idea to discuss your ideas at an early stage with your accountant and lawyer. 

Once you have made the decision to acquire a business, the next step is to search the market for one that is suitable and meets your criteria. Visit bizalert for the latest in business for sale listings

When looking to purchase an existing business it is prudent to pull together an "acquisition team". This team should include your banker, accountant and lawyer. These advisors are important in helping get a good strategic fit and in reviewing and verifying all the relevant information about the business you are considering. 

The company's reputation and strengths of its business relationships also needs assessing. Talking to existing customers, suppliers and vendors about their relationship with the business can assist in building the companies’ profile. 

If the business acquisition still looks promising after your preliminary analysis, your acquisition team should start examining the business's fit, its potential returns and its asking price. 

Check their strategic fit against your criteria, and map how you would integrate this business with your current operation. Balance sheets, income statements, cash flows and tax returns are all key indicators of a business’ ability. These documents will help you highlight any underlying problems. You will also need to map the potential benefits, and examine all key elements that you have identified in your ideal business profile to see if it's a good move in building your business.

When purchasing any business always seek professional advice.

If you're about to buy a business and need business finance or would like to find out more on how much you can borrow then visit bizfinance.

By Richard O'Brien - nzbizbuysell
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