Whether you have a specific industry of interest where you are pursuing business ownership or are open to finding the best opportunity aligned with your career goals and objectives, there are a few essential things to keep in mind to help streamline the process of buying your business!
Financial Health
When assessing whether a business is right for you, having a full scope of the business’s financial health is essential. You will have a good indicator of the business’s stability by looking at the consistency of earnings over several years. If these numbers are relatively stable this is a good sign that this is a healthy business poised for continued success.
Equally, evaluating the profit margins of the business and comparing these to the industry average will give you a good idea of the true profitability potential the business offers. Checking also the positive and predictable cash flow of the business is crucial for ongoing operations.
A key indicator of positive financial health is a high rate of repeat customers as this shows that the business earns a reliable revenue stream that it can leverage. The broader and more varied the customer base, also reduces financial risk, as the business is not overly reliant on a handful of key clients. This also strengthens the business’s overall market position.
Market Position
If you are interested in a business, identifying its market position, where it sits in comparison to its competitors and the reputation it has fostered for itself both with its peers and customers are key methods to discern its strength. A business with a recognisable and reputable brand that has a proven, loyal returning customer base offers you an exceptional competitive edge. As well as this, a business that leads in its market, through any combination of customer loyalty, brand popularity, to specialised and one-of-a-kind offerings, can help you to feel confident that you are looking at a business that is stable and strong, with solid assets for you to leverage for its continued strength in the market.
When looking for a business to buy, exploring businesses in markets that have a wealth of opportunities, or great untapped potential that you believe you can capitalise on, where you can scale up and expand your offerings, is an advantage. This can reassure you that you are stepping into a business that is not only successful right now but is poised for continued success and growth.
Supplier & Vendor Relationships
When looking into a business you are interested in buying it is an exceptional sign of business health and strength if they have strong, dependable supplier relationships, secured also through supplier contracts and agreements to allow these to be more easily maintained throughout a transition of ownership. Contracts, particularly long-term contracts, can ensure you know your costs and future of supply, reducing risk, maintaining business stability, and allowing you to transition with ease. Contracts also allow you to plan, ensuring you have a focused business strategy as you step into your new role.
Operational Efficiency
The more streamlined the existing processes of the business, the better. A business with effective and efficient operational structures, including supply chains and logistics, can support better margins for you. This includes assessing the level of automation the business incorporates where appropriate, and how up-to-date its technology and systems are as this finetuning of processes to optimise efficiency allows a business to be more resilient, agile, and scalable within the market.
Diversity of Offerings
A business with a unique, diverse, and comprehensive offering is one which has a significant competitive advantage. When buying a business, choosing one that has a unique offering that has strong demand, and is positioned to be expanded upon and continue to grow moving forward, is essential to help you to maintain a market dominant position as well as remaining not just relevant but of need and demand to consumers.
Coupled with a unique offering, a business is strengthened if it has patents, trademarks or propriety technology are assets that enhance the business’s value and market position.
Human Resources
The most valuable resource of most businesses is the skills, expertise, and competence of its teams. On top of that, considering a business that has a high-performing, capable, and committed leadership team that can maintain a business’s daily operations successfully as you move into an ownership position makes a critical difference. A strong leadership team to support you mitigates the chance of the change of ownership having any negative impact on any aspect of the business’s operations.
Legal & Regulatory Compliance
A business that has positive existing relationships and rapport with industry bodies and regulators (where relevant) is an excellent indicator of strength and business prosperity moving forward. Maintaining good relationships with these entities is essential to helping your business maintain a reputable standing in its industry and in the market, which is reflected in its customers and consumers.
Secondly, a business that is compliant with all its legal and regulatory responsibilities reduces the risks of future liabilities.
Armed with the right questions when buying a business, and knowing where to look to identify the strengths and weaknesses of a business you are interested in, is key to ensuring you walk into a business acquisition well-informed making the best decision for you and your future.
