How to decide whether to buy another business?

As a savvy business owner, you are constantly looking for opportunities to grow, whether it involves agreeing to a unique project or buy another business. Buying a business is a big move – one that has the potential to take your company to the next level. But how do you know if it’s the right decision for you?

We talked to business owners Donnie Shelton – owner of Triangle pest control and Coal – and learn more about his experience (and tips around) buying a second property.

Whether you’re considering a buying opportunity now or simply gathering information for the future, here are the important steps to take when making your decision.

1. Test your motivation

First, let’s define why you want to buy another business. Do you want to buy competitively to get more customers? Are you trying to break into a new industry? Or, maybe you’re looking for something to complement and build on your current business, as was the case with Shelton.

After growing his pest control business into a multi-million dollar business, Shelton bought the marketing company he was working with in hopes of building it into a resource for business owners in the future. lawn care and pest control industry. “The home services segment tends to be behind the times,” he explains, “and there is a real opportunity to turn this into an opportunity to help other business owners grow their businesses and teams in the future.” the digital age.”

Accurately pinpointing your motivation for buying a second company will help you figure out your goals – and what you need to do to achieve them.

2. Figure out what changes you have to make

Logically, you need to consider the size and location of your business, as well as its industry, customer base, and competitors. Another important factor is to consider how, or even if, your two businesses will come together.

“My first time [business],” said Shelton, “I care a lot about profitability and scalability, so I can grow it quickly. Second, I have to consider how it will fit into what I already have.”

Take some time to determine what changes you will have to make in your current business and personal life in order to successfully develop your second business, and how long to make those changes. change that. “When the opportunity comes last [to buy my second business]”,” says Shelton, “I’ve built a productive team so I can be less involved in day-to-day activities. This allowed him to allocate more time and resources to his second business.

It’s important to figure out if you’re in position, such as expanding your management team or cutting your time if you need to. “My whole business philosophy is to keep the wheel in balance – you have to focus on serving your suppliers, customers, employees, and owners equally,” says Shelton.

3. Check your financial situation

Buying another business is a big investment, so it’s important to have all the facts before you make an offer. First, check your existing business to see how well it’s doing. How was the profit last quarter? What do you estimate you will earn in the future? What are your funding options like?

Confidence in your ability to grow your new company, and knowing that you have the resources to support yourself in the event things go awry, can go a long way. “I was willing to take a bigger financial risk knowing I had a solution to what so many people in the pest and grass industry face,” says Shelton. “I also succeeded in my first business, and our partnership strengthens both,” he explains.

Shelton added: “Saving is very important in any case. No matter how comfortable you are, it’s wise to increase your budget to account for unforeseen obstacles and potential loss of profits during the transition period. Security sponsor your business can also help. Having extra cash flow to buy equipment, hire new employees, or stay afloat can help give you flexibility and peace of mind, allowing you to focus on growing your business instead of scrambling.

4. Do your due diligence

Before you buy a business – and potentially inherit loads of debt – do your homework to investigate its financial health. Some businesses look clean on the surface, but in reality, there are many problems. Consider hiring a business broker or working with an independent valuation firm. They’ll help you determine the value of your business and outline any financial troubles the business has had in the past, so you know exactly what you’re dealing with.

5. Map out a growth plan

Perhaps the most important question to ask yourself is: How will you add value to the new company? Consider what strategies you’ll use to improve profits, expand your customer base, and manage employees. Also find out if you want to oversee and run your second business similarly to your first, or take a different approach.

Shelton says that just because you own two companies doesn’t mean you have to run them the same way. “There is some overlap in the basic values ​​of both [my businesses] because I was involved, but the culture and process were completely different,” he explained. Despite the differences, Shelton said he believes both his businesses will continue to thrive because they serve each other.

“Being involved in the pest control industry and understanding the challenges small business owners face there has given us a lot of insight into serving our customers at Coalmarch. And being able to get dealer insight on how to stay competitive and what customers are looking for has helped us continue to grow Triangle across state lines,” he said.

Key point

Buying a second business can open the door for you to earn more and expand your skills as an entrepreneur. However, it’s definitely not a decision you should make lightly like it can really harm your startup. Follow the steps above and talk to trusted business advisors to determine if it’s the right move for your business or if there’s a better way to grow.

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