Taking over an existing business is an interesting concept in the business world that is, at one point, considered by every single successful entrepreneur out there. Imagine a scenario where you want to start your own delivery system. Wouldn’t it be just simpler to buy a small specialized delivery agency (with all the personnel, equipment, practices and systems) than to establish this on your own? Of course, this would also cost you substantially more. Of course, this option is in no way exclusive this particular scenario and can work in virtually any combination (HR, IT or customer support department, i.e.). All in all, here are six factors that you need to consider in this situation.
Research the logistics
The first thing you have to figure out when taking over the business is the logistics of the effort as a whole. How does a transfer of ownership works? How is it affected by the ownership structure? Does it function differently if you’re buying a sole proprietorship than it would work if you were to buy an LLC? Next, you need to ask what kind of paperwork you’ll be faced with in order to see this through. The most important questions, by far, are the ones regarding the risks and benefits of taking over an existing business. What comes next is another major concern that you have to address.
Research on the target company
The next thing is the research on the target company and it’s quite important that you do this as thoroughly as possible. First, research its ups and downs over the course of their existence. Usually, it won’t be too much of research. Next, ask the question of why they’re selling. Sure, sometimes it’s the personal reasons but at other times, it’s because the company is not doing so good. Are there some skeletons in the closet that you’ll have to deal with yourself on a later date? Most importantly, think about any flaws and strengths of the company that you’re acquiring.
Figure out the financial aspect of an existing business
Before you acquire a business in question you need to do some budget. Here, you’re not just thinking about the money required to acquire the business but also things like fees and immediate subsequent investments. Sure, there are some who just acquire a business in order to get one less competitor to deal with, however, what if your intention is to further invest in the company and incorporate it within your system. For instance, in 2012 Amazon spent $775 million in order to acquire Kiva Systems but this is just the beginning of their spending on robotization.
Which assets have you acquired
When considering the acquisition, one of the most important questions to ask is which assets are you acquiring this way, as well. This ranges from the customers that the previous company had (not all of them may stay but a large chunk just might stick around). Then, there’s the inventory and equipment. Other than this, there are contacts and, the most important of all, intellectual property (IP). If the business in question has an invaluable pattern or trademark, this could be something that you can use to your advantage.
Are you a match?
Once you’re done reviewing all the objective aspects of running a business, there are a couple of abstract questions that you have to ask. For instance, are your existing company and the new one a match. Closely examine their corporate values and corporate culture and see how it aligns against yours. This is an incredibly important factor to review.
Define success
In the end, one of the hardest questions that you’ll ask is whether it was all worth it. The answer to this question depends on your previous expectations. As long as you’re thorough in your research and as long as you’re realistic, there shouldn’t be an issue in this field. Some things that you can revolve around are the break-even point, your position in the marketing and the performance of the acquired company before and after the takeover.
In conclusion
Of course, an acquisition also limits you in regards to customization and may require you to embark on a complex and costly reorganization (even rebranding) project. Still, it saves you a lot of effort when it comes to not having to build a business or a department from the ground up. Either way, even if you never do this in your entire entrepreneurial career, it’s always good to know all your options.
