One of the quickest ways to get into the business world is to buy an existing one. There are many advantages that come with such a move. Some are apparent, others less so.
That said, what are some of the unexpected benefits you may encounter when you acquire a business? Read on.
Photo by Artem Podrez on Pexels
Access to an Established Customer Base
A business cannot survive without loyal customers who trust the brand. When buying an existing business, you gain more than just equipment and inventory; you also inherit its customer relationships. This means you can spend much less money on marketing since people already know and trust the business.
These customers offer more than just sales. They also become a valuable source of feedback, especially helpful since you’re new to running this particular business. You can discover what products or services they love and what they don’t like. Once you know customer histories, you’ll know exactly where to focus your efforts.
Innovative Products or Services
If you have gaps in your current business or want to expand what you offer, buying another company can help fill them. When you purchase an existing business, you gain access to their unique products and services. These new offerings can strengthen your current business and give you more ways to serve customers.
For instance, the acquired business might have a better delivery system or packaging solution. Adopting these improvements can enhance your entire operation. The key to reaping this advantage is to take time to evaluate which products or services truly add value. Consider whether they align with current market trends, too. Does the acquired business offer something customers are demanding right now? If yes, lean into it. Use that momentum to grow faster.
Most importantly, ensure these new offerings fit your long-term strategy. A good way to get this whole process right is to research existing businesses listed for sale online or any others that match what you are looking for. Understand what makes them stand out and whether they can fit with your plans for the future. If they do, consider making a move.
Expanded Market Reach
Business acquisition can be a good way to expand into new markets in terms of geography and demographics. Say you own a chain of gyms down in New York City. You then get a chance to acquire a franchise in California. Just like that, you’ve gained a presence on the West Coast.
This expansion could take many months or even years to achieve. For one, starting fresh in a new city means building relationships, learning local preferences, and earning customer trust from scratch. But when you buy an existing business, all these foundations are already built for you.
Plus, expanded reach opens doors for cross-promotion. If the California gym offers yoga classes while yours focuses on weightlifting, you can combine forces. You can promote each other’s strengths and attract even more members.
Photo by Artem Podrez on Pexels
Talented Employees and Management Team
Any good business has employees who stand out. Buying an organization can mean absorbing the talent as well, a good thing because they are often not easy to replace. If you keep them on board, you gain instant access to years of expertise.
One thing to keep in mind, though, is that retaining key employees isn’t always a given. You have to make them feel valued. Appreciate them, invite their expertise into your decision-making process, and make sure the executive compensation is competitive. Do your best to keep the best when you acquire a business.
Operational Efficiencies
Operational efficiencies entail combining resources in ways that save money and improve how things work. For example, imagine you own two restaurants. One orders spices weekly, while the other does the same thing separately. After buying the second restaurant, you realize you can get better prices by combining both orders and buying in bulk.
But this isn’t just about cutting costs. Combining operations also creates opportunities for growth. Here’s another example from a different industry: say you own a marketing agency and then buy a web design company. Your agency excels at digital advertising, while the design company struggles to attract new clients. You can share your marketing strategies with them, while they can help improve your agency’s website services. Both businesses benefit and grow stronger together.
However, these efficiencies aren’t always easy to spot. You’ll often need to examine each part of both operations carefully. So, talk to employees who understand the daily operations better than anyone else. They can help you find where the businesses overlap and where you can combine efforts most effectively.
Intellectual Property (IP) Gains
When you acquire a business, you might also pick up some seriously valuable intellectual property. This could be anything from advanced technology patents and trademarks to proprietary recipes or software.
One thing, though, not all IP is obvious. Sometimes, it’s hidden in processes or systems. You may end up acquiring a restaurant whose secret recipe has been passed down through generations, or perhaps a manufacturing plant that uses a specific technique that makes production faster.
So, do your due diligence to make the most of these IP gains. Find out what patents and trademarks the business owns and whether there are trade secrets you should know about before you sign the sales agreement.
If the company you acquire is already profitable, you’ve gained an immediate source of cash flow. This is huge because it helps offset business acquisition costs and gives you breathing room to grow.
One thing, though, resist the urge to drain the bank accounts immediately. Reinvest so the business continues to thrive. Also, keep an eye on working capital. Make sure there’s enough cash on hand to cover day-to-day operations.
Sometimes, businesses look profitable on paper but struggle with liquidity. That said, during due diligence, check accounts receivable and payable to ascertain whether the business valuation is actually on point.
Learning from Past Mistakes
One of the most underrated benefits of business acquisition is the chance to learn from its past mistakes. Every business has faced challenges, and understanding those can save you a lot of headaches.
Think about it: The acquired company likely went through tough times, be it cash flow issues, bad hires, a weak business plan, supply chain issues, or marketing flops. Studying what happened can help you avoid repeating the same errors.
Final Thoughts
Acquiring a business opens doors to advantages you might not expect. From gaining a solid customer base and resources to expanding your market reach and improving operations, these hidden benefits can accelerate your success in many ways. The key is recognizing these opportunities and making the most of them after the purchase.
So, do your homework. Check the balance sheet, financial statement, other financial metrics, and regulatory approvals. If convinced, feel free to begin your journey as a new business owner.
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