The Most Successful Business Growth Strategy
Most people tend to assume that they can buy a business that is failing at a deep discount and then by rolling up their sleeves turn it into a profit making company. The failure rate for startup businesses is on average about 55 percent the last few years according to the Small Business Administration. The failure rate according to many business experts is more like 80 percent for those who decide that buying an established business with the hopes of turning it around and making a profit.
You Should Buy a Profitable Business
The obvious reason to buy a profitable business is that you as the owner will realize a positive cash flow from the very first day you take ownership. Owning a profitable business offers the owner a couple of things. First, a business making money usually has an established reputation worth its weight in gold. Second, sometimes you can find an owner who is willing to finance your deal on a profitable business.
How to Buy a Business Making Money
Before your sign the papers and buy what you hope is a profitable business you need to do some research.
No matter how this business might be presented to you for sale, make sure that it has been making money for at least the last five years.
You shouldn't buy a business that is netting under a $100,000 annually in pretax cash flow. Less than $100,000 in cash flow is just too small a business to be worth your time and energy.
Your research concerning finding a profitable company to buy should include knowing if they have a competitive advantage over their rivals. You need to verify that this money making business you are considering buying is offering something unique to their customers in their industry.
It is important throughout this business buying process to make sure that you keep your options open. Research what businesses are the leaders of their industries, even if that particular industry is having a difficult time in the current economy. The survivors are usually the top businesses in their industry during economic downturns and they usually will be the most profitable when the economy recovers.
Top Business Growth Strategies
When you have signed your name to your new business the real work will begin.
Many experts agree that it is important to try and negotiate with the seller of your business a contract to retain them to help consultant. After all, good owners have built the business reputation and can help you continue that with your new ownership.
Mismanagement will doom a business to failure faster than anything else. Hire a good manager who understands the business and the people. It is also important as the new owner of the business to try and retain the best talent.
Compensate the good employees that you have decided to keep well and they will continue under the transition to help your business. These people who have made this business profitable obviously understand the right way to market your business for future profits.
Thursday, September 22, 2011
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