As well as helping businesses with the processes of acquiring companies, we help entrepreneurs buy businesses too. So how can an entrepreneur acquire a business? Entrepreneurs often have a different mindset when it comes to acquisition. A business may want to acquire another one to gain market share, develop new products or diversify its commercial interests. It’s a different story for entrepreneurs. Read on to discover some of the key considerations entrepreneurs need to weigh up when acquiring a business.
Entrepreneurs often have a portfolio of interests that takes up their time. So when they express an interest in buying a company, we discuss in detail what their involvement in the business will be. Some entrepreneurs will want to buy a business that requires a heavy involvement, that can offer them a challenge or help them better understand a sector or market. Or this can sometimes involve turning around a company that is sound but that has been run badly.
If the aim is a business that won’t require heavy involvement, then the search criteria needs adjusting. Your efforts should focus on a business that already possesses a strong management team. Ideally, the existing managers will be capable of running the business day-to-day under new ownership leaving the entrepreneur to take a more arms-length approach.
All entrepreneurs have expertise and knowledge that they can bring to the table post-acquisition. Perhaps you know how to lower costs in a number of business set-ups or have a knack for finding new markets for existing enterprises? Your personal experience will be crucial for the future success of the business you are considering acquiring. Importantly, this is the case even if you don’t want to run it and make all of the day-to-day operational decisions.
As the owner, you set the tone for the rest of the management team. Therefore, you need to consider to what degree you already understand the type of business you are buying. Are you well-versed in the sector or do you have skills from a related one? Think about how your skills can add value to the company. It is fair to say that most successful entrepreneurs stick to what they know, but some push their boundaries and are comfortable throwing themselves into new commercial areas.
For entrepreneurs who want the direct involvement that running a company they have bought brings, then the good news is that most private acquisitions fit this model.
Small and medium enterprises tend to require more frequent changes in senior management structure when sold. However, bear in mind that it is not necessarily the case that a full handover is required on day one of the business purchase, only in due course.
Seek out business people who are looking to retire from a working life of building up their going concerns. This is the area where you will find more choice if you want to get your hands on a company that will allow you to develop your direct managerial skills.
During the research phase of seeking a business to buy, ask yourself whether the acquisition target is seeking a trade sale? Many businesses will only consider serious offers it gives them the opportunity of selling to an enterprise that is already established in their industry or a related sector of the economy.
This may put private entrepreneurial buyers on the back foot, so you will need to use your experience to demonstrate how you can benefit the company in the future. In other words, it is time to sell yourself. What’s your story?
Your personal identity, business history and sources of funding will be looked into thoroughly once you make any sort of approach for a business acquisition. Any potential seller will rapidly want to know whether or not you are a viable contender for their business. Unfortunately, some businesses receive a lot of enquiries from people that are soon identified as time-wasters. Therefore, you need to make sure that you are not ruled out soon after an approach because you and your finances cannot be easily presented.
Bear in mind that target business sellers tend to be more cautious around private investors compared to businesses. They will want to know the specifics around your acquisition finances. For example, whether you have your own private funding, are borrowing from a bank or have private backers.
Be warned, too, that most business owners will look down on offers with low values upfront, or an offer that seems to be merely returning the profit to the owner for a couple of years.
It is best to have options for funding a company acquisition in place before you need to make an offer. There are a number of specialist finance brokers who can help.
As an entrepreneur, you will have more room for manoeuvre and be more agile than a typical corporate takeover.
However, with the exception of some very specific business sales, you likely do not have the clout of a corporate or investment firm.
You need to ask yourself where you can gain an advantage as an individual over any company you might be in competition with. What skills can you offer the enterprise to give it a new lease of life? Do you have relevant sector experience? Business owners will want to know that you are capable of running the business. However, they will also want to know that you have experience with their customer profile. For example, overseas clients, business to business sales or business to consumer marketing.
Finally, ask whether you’ll be able to speak with existing employees in a way that gives confidence in your ownership. After all, existing owners have personal relationships with their staff and won’t want to feel they have let them down.
We help business owners and entrepreneurs alike find and acquire the right business for them. Our on and off-market acquisition services will help you find great opportunities and acquire them on favourable terms.
If you are interested in having a free and confidential conversation about this, then call us today on 01962 609 000.
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