When you want to put up a business, you may either start from scratch, buy a franchise, or buy an existing company. Entrepreneurs who choose the last option do so for various reasons, such as reducing competition or benefiting from a well-known brand name. Both are advantageous because they immediately secure their market since existing businesses already have a loyal customer base. This saves them from the risks of not making enough impact as a newly-founded company.
But aside from those reasons, entrepreneurs also buy a business in order to save it. Companies that are on the brink of bankruptcy may be put up for sale for more established corporations to buy; therefore, reviving the company. In addition, some company owners may no longer want to continue managing their businesses, so they sell those to another more deserving entrepreneur or corporation.d.
Consider Why the Business Has Failed
Before buying an existing business in Utah or any other state, study why it has failed and then take the necessary action to save it based on the reasons you’ll gather. Break down the aspects of the business and form questions from those. Here’s an example:
- Product/Service – Does the product or service fail to meet the customers’ demands?
- Location – Is the business’s location inaccessible or unfit for its products or services?
- Store/Office – Is their store or office in a severely poor condition?
- Customer Service – Did the business suffer a bad reputation due to poor customer service?
- Finances – Did the business accumulate too much debt that they could no longer repay?
- Marketing and Advertising – Does the business have a loyal customer base? How do they promote their products/services?
- Owners – Are the owners retiring but has no heirs to transfer the ownership of the business to? Or have they simply lost interest in managing the business?
By answering those questions, you can develop a new business plan that can revive the failing company.
Finding a Business to Buy
When you come across a failing business for sale, always review their financial reports first. Pending litigation, outstanding payroll, and tax issues are major red flags, so don’t take the risk. Look at their sales records as well. If they’ve been suffering poor sales, that means their customer base is weak, so you aren’t likely to benefit from their existing customers. The business must have a happy and strong customer base.
Check the manpower situation. You don’t want to buy a company with dozens of employees resigning at once. You also want to avoid a company that relies on only one competent employee because losing them will put the business at risk of further failing.
How to Revive a Dying Business
Once you’ve already taken over the business, review its operating costs right away. Identify which expense doesn’t generate revenue and recommend cutting down on those. Make sure expenses such as rent, payroll, and logistics don’t exceed the revenue.
Win over customers by first strengthening the current customer base. Reach out to them and ask for their feedback regarding the company’s strong and weak points. From there, develop a course of action that will increase your sales and revenue again, such as implementing new marketing strategies.
If the business lacks high-tech processing systems, invest in necessary tech upgrades to have business operations streamlined. Up-to-date technology will increase efficiency and reduce operating expenses.
Improve everything that needs to be revamped. If the store or office is falling apart, have it renovated or remodeled. Scout for new suppliers if there’s a need, and hire new and more skilled employees. Ask the previous owners how they managed the business to get tips on how you’ll run it.
Once you already re-established the business, be consistent with your efforts and always look for ways to improve. Do not repeat the previous owner’s mistakes; learn from them instead.