When the majority of people think of establishing a business, they think of starting from scratch. The idea of developing your own ideas and scaling the company from the ground up is very irresistible. However, beginning from scratch comes with its set of disadvantages. These include the challenge of building a new customer base, marketing the new establishment, bringing on new staff and keeping the cash flow going.
When you couple all this up with the fact that you might not have a track record or reputation to lean on, making as much as a million dollars by buying a company and scaling it sounds like a long shot. However, with Fundnd, they know it’s possible and easier. Fundnd recently just acquired Aassist.org in what has been termed as “one of the most promising acquisitions of the year.”
What is a Buyout?
A buyout takes place when one party makes an investment transaction to acquire control of a company. This transaction can be made either through a whole purchase or by getting a dominative equity interest which should be at least 51% of the company’s voting shares. The most probable reasons for a buyout are usually when the company being acquired is undervalued or is considered to be underperforming. However, for a good buyout to take place, the purchaser should first establish that the business on market has the potential for improving operationally and financially under new ownership and control.
A buyout functions like any other investment. Fundnd recommends that a financially sound transaction will only take place when an acquiring party sees that there is an opportunity of making a good return on their investment.
Financing a Buyout
According to Fundnd, the funds to be used in buyout transactions can be supplied by private individuals, private equity firms, companies, pension funds, lenders, and other institutions. Buyout firms like Fundnd focus on funding and facilitating buyouts. They may choose to do so alone or with others in a deal. These firms may get their funding from wealthy individuals, or institutional investors.
Benefits of a Buyout
The goal that Fundnd has, is that buy buying or having multiple companies under one entity, wealth can be attributed much faster and easier not only for their own benefit but for the benefit of the person selling their company. It definitely outweighs starting a business from scratch which 9 times out of 10 will fail. However, if you have a business that’s been profitable for 15+ years, there’s not much that will change that and the risk of failure decreases to about 2%. A buyout can reduce operational expenses, which consequently leads to a boost in profitability. When the purchaser does a comparison of existing systems and processes to select the one that is best, it ends up in regeneration of business strategies that contribute to the growth of the new business. The newly formed company is also in a better position to increase economies of scale and lessen the need to get into a price war with competitors.
Speaking of competitors, a buyout gives any business owner the opportunity to do away with their competition by purchasing their business. The effect of buying out your competition is a possible reduction in prices for the products or services both companies were providing. All in all, buying out your competition is beneficial to your new customers.
How To Buy the Perfect Business to Grow
To buy the perfect business, your set of decisions begins with choosing the right type of business that suits you. To do this, consider one industry in which you’re either familiar, understand, or have experience in. It is important that you make sure the company you’re interested in best matches your skills and experience.
It is also important to consider how big or how small the business you want to buy is. The size of a business is mainly measured along the scales of number of employees, number of locations and volume of sales. Remember to conduct an assessment of all costs of doing business in the geographical location in which the business is located including wages and taxes.
Fundnd also recommends that you talk to business owners in your industry as they have enough experience in running the kind of business you’re interested in. It will also help to flex your networking abilities and call upon your business contacts for consultation.
You may also prefer contacting a business broker. Whichever way you choose, it is always a good thing to consult the experts. Fundnd can offer you the assistance that brokers can’t offer, especially for first-time buyers.