By Julia Mitchell
Poor planning, bad cash flow practices, and ineffective management are some of the major reasons for business closures, according to Chron. But, in the world of business, one person’s loss is often another person’s gain. While a business could be struggling under the current owner, things could turn around with a new one, especially if they have a good product and growth potential. But, the new owner will need to undertake significant risk and invest time, effort, and money to turn a failed business into a profitable one. In this article by Citizen Media News, we’ll explore the best steps entrepreneurs can follow when buying a struggling business and making it a success.
- Research Available Businesses
If you’re in the market for a business, the first step will be to conduct an online search for available listings. There are various websites on which owners will upload a profile of the business, details, and asking price. When shortlisting businesses, consider the following aspects:
- Size: For entrepreneurs used to managing small size businesses, it’s best to stick to that approach rather than spending cash on purchasing a large business.
- Location: The location of a business will impact numerous things such as license requirements, taxation, labor costs, etc. Hence, avoid businesses where you’ll need to incur increased spending on the above.
- Hire a Business Broker
If you’re struggling to find business listings, consider working with a business broker who can do the leg work for you. Additionally, you can share a list of requirements with the broker using which they can screen listings and share those which are a great fit.
A broker will also be a great resource during negotiations and handling paperwork.
- Conduct SWOT Analysis
Before finalizing on purchasing the business, conduct a SWOT analysis which should include details regarding the following:
- Strengths: Whether the business has any unique selling point (USP) and other positives such as a large customer base, good network of suppliers, etc.
- Weaknesses: Lack of capital, use of outdated systems, bad brand image, etc.
- Opportunities: New product lines, limited competitors in the niche, and more.
- Threats: Changing market trends, the emergence of new competitors, and more.
Not only can this analysis be used in negotiations, but will also serve as the basis for making key business decisions.
- Take Steps to Cut Costs
In the months following the sale, your priority will need to be getting the business to a good financial standing, which can be done through the following ways:
- Discard non-productive assets such as unused equipment, excess storage space, company vehicles, etc.
- Hone in on the product offering(s) which bring in the most revenue and channel resources towards increasing their sale. At the same time, invest in researching similar products which can be sold to the same set of customers.
- If the business is run from a physical location, consider negotiating a better deal with the landlord or relocating to a cheaper location that provides better chances of success.
- Utilize Technology Solutions
Post-purchase one of the best ways to start turning things around will be to incorporate the best technology solutions for all areas of the business, such as:
- Business Process Management (BPM) Software: This is an AI-powered software that will increase business efficiency and productivity by automating your digital workflow. BPM analyses the functioning of all existing digital tools and creates a master workflow. This workflow is further analyzed by AI to pinpoint operational inefficiencies and provide solutions to streamline end-to-end processes.
Additionally, as reported by Accenture, the use of AI can help companies increase profits by up to 60%. Making BPM a must-have addition to your new business.
- Accounting Software: Accounting software is key to balancing the books and ensuring the business remains financially healthy. Use the software to create accurate financial projections, which should include the timeline to pay off debt, calculate capital requirements and make accurate tax filings.
When it comes to adapting a failed business to the current marketplace demands using technology solutions such as business process management will be key. Additionally, create accurate goals using the SWOT technique and prioritize good cash flow management to make the business self-sufficient.