The Entrepreneur's Guide to Business Acquisition

Author

Cashflow Chronicles
November 17, 2023

Week’s Top Picks

Quick Entrepreneurial Tales, Investment Stories, Interesting Stuff & Resources to Spark Your Fire

First up, the most popular news stories and top AI tools to accelerate your entrepreneurial journey:

(1) Open AI just had its 2023 DevDay and there are some insane new features reshaping the world of AI

(2) How a 55-year-old farmer brings in an extra $300,000 a year only working 25 hours a week on the side

(3) If a 21-year-old in college can bring in $500,000 from his dorm room then so can you!

Top AI Tools This Week 🔥

🤖 Zupyak does SEO research and content creation with AI, eliminating the need for freelancers or outsourced agencies. When starting or acquiring a business, finding a way to complete tedious tasks faster is a must, which is where Zupyak comes in! (link)

🤖 Claude AI manages tedious tasks as your personal AI assistant. Once again, getting rid of those tedious tasks is a must when acquiring or running a business! (link)

Here's a sneak peek of what we’ll cover in today’s business AI special:

✔️ Discover how to enter the market for Acquiring a business
✔️ What to look for when acquiring a business
✔️ A dive into the pros and cons of acquiring a business
✔️ Is acquiring a business something for you?
✔️ Some killer Tweets this week to help you in your business acquisition journey

Hey Cashflowers,

Welcome to this week's dive into the world of Business Acquisition. We're unpacking how to get into acquiring a business, what to look (and look out) for, the pros and cons of acquiring a business, and whether or not acquiring a business is for you with our guests Mattias Smith, Kevin Henderson, and Ujwal Velagapudi….

Let’s get into it!

How to get into acquiring a business?

How to Enter the Market For Acquiring a Business

Acquiring a business may be something slightly outlandish to you, and you may not know exactly how to buy a business, or how you would even find one for sale in the first place.

Our guest Ujwal, on the space this past Sunday, spoke on how he acquired his first business through Craigslist. He initially started buying real estate investment properties on Craigslist while he was in college.

Later after he had built up his portfolio of real estate investment properties he got into buying small businesses on Craigslist. Some examples of businesses he bought are a sports bar, a gym, and an Ecommerce business.

Another guest in our space last weekend, Kevin Henderson, got into buying a business because of the people around him. He suggests it’s the people in your network that drive you to do things.

Sometimes it might just come down to spending time with people that know how to acquire a business, or have done it before.

It’s not like buying a business is super difficult, and Craigslist proves to be the place to buy anything once again. When looking to acquire a business yourself it’s more a matter of how you’ll buy it, rather than a search for one.

Here are 3 ways to acquire an already existing business:

  • Direct Purchase: You can negotiate directly with the owner of a business that is already established and operational. This could involve buying the entire business or a significant portion of its assets to be the majority owner.

  • Business Brokers: Utilize the services of a business broker who specializes in facilitating the buying and selling of businesses. Brokers can help match buyers with sellers and streamline the negotiation process. For your first time purchasing a business, this could make it much easier.

  • Franchise Opportunities: While this isn’t technically buying a business, it’s a good consideration for your first time running a business.

    This is a business model where you buy the right to operate a business using the branding, products, and support of an established company (the franchisor). This gives you the ability to run a business without starting a business from scratch or being completely at risk.

Pros vs. Cons

For Better or Worse: Acquiring a Business


In today's world, it seems that very few people look to start or run businesses of their own.

Especially when going to university has become such a norm, it’s no surprise. This is why we bring this content to you and try to spark your interest. Let’s get into some of the pros and cons of acquiring a Business:

Pros of Acquiring a Business:

  1. Established Track Record: An existing business likely has a track record of operations, which provides historical data on financial performance, customer trends, and market positioning that you can analyze and use for future growth. This reduces uncertainty compared to starting a new venture.

  2. Existing Customer Base: Acquiring a business often means you’ll be inheriting an established customer base. This also brings an immediate revenue stream and opportunities for growth through improved customer relations or additional product/service offerings. This puts you ahead of the typical startup, where you might have to raise capital and be in the negative temporarily (Or forever).

  3. Operational Infrastructure: An existing business typically comes with an established operational infrastructure, including facilities, equipment, and processes (depending on the size). This can save time and resources compared to building your own infrastructure from scratch.

  4. Experienced Staff: When you acquire a business you’ll most likely gain access to experienced employees who are familiar with the industry and the specific operations of the company. This can contribute to a smoother transition and ongoing success, as long as you don’t try to rewrite the script too soon.

Cons of Acquiring a Business

  1. Initial Cost and Financing: Acquiring an established business can be expensive. Your initial cost may include the purchase price, legal fees, and other associated expenses. Securing financing for the acquisition can be a challenge, but there’s plenty of advice from our space you can learn from.

  2. Integration Challenges: Integrating the acquired business into your existing operations can be complex, especially if it’s not the only thing you’re working on. Differences may lead to resistance from existing employees and operational challenges.

  3. Hidden Liabilities: Despite thorough due diligence, there may be hidden liabilities such as legal issues, outstanding debts, or contractual obligations you could uncover after acquiring a business. Uncovering and addressing these issues post-acquisition can be time-consuming and costly, but it’s always a risk.

  4. Resistance to Change: Existing employees and stakeholders may challenge your new changes. This resistance can impact the morale and productivity of your business, making it crucial to carefully manage the transition and communicate effectively with your staff.

Acquiring any form of business is going to be a learning curve and a challenge at the same time, but the potential reward is worth it when it’s something you’re passionate about!

As with any investment, thorough research and planning can be your best allies for success.

Suggestions

What to Look For When Acquiring a Business

Acquiring the wrong business can lead you to tons of headaches and many problems, but finding the right one can lead you to financial freedom and an enjoyable journey. This is why it’s crucial to find the right business for you.

One of the most important parts of acquiring a business is you want to find a business that has an operating staff, general manager, or some form of managing team.

You don’t want to acquire a business where you’re the one doing all the work and it’s an owner-based business. The problem here is that most of the time you won’t be well-versed in the business you’re buying, leading you to tons of problems.

With a General manager or a managing staff, you’ll be able to sit back and learn the business once you’ve bought it while operations continue to run smoothly.

Once you understand the business fully and you’re ready to make changes, having a managing staff will make that easier as well.

Another thing to look for is stable revenue. This comes in many forms as different businesses have different revenues. A preferable option is a B2B (Business to business) business as that’ll be your business providing a service to another business.

This is preferable because you’ll have clients that are on retainer and bring consistent month-to-month revenue.

The last tip is to look for a business that is something you’re versed in. If you’re someone who has been working in finance for years, it’s probably in your best interest to buy a business in that field as you’ll be familiar with it.

Buying a business not in a field of your knowledge can be a learning curve and a huge challenge, especially if you’re having to make decisions early in your ownership without being in full knowledge of your business’s best interest.

Alright Cashflowers, we hope that you enjoyed some of our tips on business acquiring this week and we look forward to your entrepreneurial journeys ahead.

If you’re looking for more on this topic we highly suggest listening to the space as there is a ton more information broken down there by true experts.

And with that, Until next time Cashflowers!

Cheers!

Cashflow Chronicles

Tweets of the Week

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