Is Buying A Rival Business Really A Good Idea?

Is Buying A Rival Business Really A Good Idea?

on May 1, 2019 in Small business

Dealing with competition is one of the hardest parts of being a business owner. It’s up to you to find a way to set yourself apart and build a brand that customers will trust over anybody else. Some business owners may also decide to buy out the competition. It’s a good strategic move which allows you to remove a rival company and increase your market share. However, taking on another company is a big challenge and if you aren’t careful, you might bite off more than you can chew and end up running both businesses into the ground. If you’ve been considering buying out a rival company, make sure that you’ve considered these things first.

Does It Have Potential?

The first thing that you need to consider is whether the new business that you’re buying has the potential to make you money or not. You’re going to be investing a lot of money and if you can’t see a return on that, it might be the end of both businesses for good. Think about why they’re selling in the first place, is it because they’re struggling to bring in enough revenue? If that’s the case, what makes you think that you can do any better? In some cases, you might be able to turn the company around but it’s a big risk to take. If the business is doing fine but the previous owners want to sell up and move onto other things, you need to think about the potential for business growth. If you’re not unable to grow the new business, it’s going to be a dead weight that you’re carrying around with you and it might be better to just focus on your current business.

 

Who Will Run It?

Running a business takes a lot of hard work and time, so you’ve got to think about who is going to run this new business. Are you going to do it yourself? If so, can you really handle running two companies at the same time? It might be best to hire professional body corporate managers to run the company instead. You’ll still get the profits, but you won’t be stretching yourself across two separate businesses. It’s important that you think about their current employees and decide whether you’re going to keep them on or bring your own people in once the sale is finalized.

 

Can You Get The Money?

This is all irrelevant if you can’t borrow the money to buy the business in the first place, so you need to consider your financial position. Lenders will ask you for details about the performance of the business that you plan to buy so they can gauge whether you’re likely to make any money from it. They’ll also want to know about your other business and your personal finances so you’re going to need to give them detailed financial reports about your company. If your finances aren’t in a good state, you probably aren’t going to get the money that you need.

 

Buying a business can seriously backfire so before you rush into anything, make sure that you’ve considered these things.

 

 

Image credit:  Pixabay.com

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