In this video, Mr Anurag Aggarwal shares the advantages and disadvantages of acquiring businesses which are already running in profit or loss.
Your first question would be that why would someone give a business that is already running. But yes there are many people who want to sell their business due to many reasons- not willing to continue with the same business, not earning sufficient profits, no money for investment etc.
Kim Woo Jung of Daewoo Motors, the owner of Daewoo motors, was a newspaper delivery boy but in 1990s, the value of his assets was so much that his company was on no.2. He used to acquire a lot of businesses and the moment he felt that it is profitable to sell off, he would do it. This is how he earned a lot of money.
ADVANTAGES (from 5:51 min)
- Start-Up work is done- Things to be done at the time of starting a business is already done before you acquire the business.
- Plans & procedures in place- All of work of plans and procedure is already done by the person who started it. A lot of problems are faced by the person who starts a business so you are able to escape from these if you acquire a business.
- Saves time- You do not have to invest much of your time in planning and procedures as the things are already done.
- Saves money- It is not necessary that a person is selling his business because it is a sick business and not giving profits. There could be other reasons also. The person may not be able to run efficiently, some partner died, his children want to pursue some other business etc. But acquiring a business can save your money as it is already set.
- Not much experiments- Due to all the above advantages, you do not have to do much advantages to earn more profits.
- Immediate cash flow– You get an immediate cash flow and this is generally positive. It may get negative only if you have very less knowledge of running the business.
- Easier to secure loan– Another advantage is that it is if there is a building, there is infrastructure then it becomes easier to secure loan against it, you can attract investors and also start IPO.
- Readymade customers– You already have the customers and the only thing you would have to do is to maintain them and add new ones.
- Readymade goodwill- Since the business is already there in the market, so you already have a goodwill in the market.
- Readymade suppliers- You would not have to look for the suppliers immediately. You may do it later in case you feel the need of getting someone better.
- Plant & equipment- If you want to start a new business, you would need to invest a handsome amount in décor, plant and equipment but if you are acquiring an already set business, you would be able to avoid this huge investment.
- Existing employees will have experience- The employees that you get have enough knowledge about plant and equipment, the market, the customers, the suppliers which is another advantage of acquiring a business.
Disadvantages (from 10:00 min)
- Need a large amount upfront– You have to shell out a lot of money to acquire a business so the decision should be taken very carefully.
- Poorly located- You must see to it that the business should not be poorly located from the view of customers, employees, suppliers etc.
- Low staff morale- Know how the employees are. Are they dedicated? Are they willing to work as a team? Do they have a high morale? Check all these things.
- Declining Industry- Check if the industry is going down or up?
- Excessive competition- If there is too much of competition already, it may become challenging to survive.
- Hidden problems- Make sure that there are no hidden problems.
Things to keep in mind (from 11:47 min)
- Business on trial- Try taking the business for a week or so in order to understand the business deeper and find out the problems if any.
- Search other business on sale- Are there any more similar businesses on sale? If yes, then find out more about them too to take a better decision.
- Don’t invest more than 10%- Find out your current wealth and do not invest more than 10% of it. You may use other person’s investment.
- Worst comes to worst- You must also calculate the loss you may have to face in case the situation becomes worst and you have to shut your business.
For joining the public speaking course or business training by Anurag Aggarwal, feel free to call us at 7834-99-9292 or visit www.anuragaggarwal.com .