With your know-how, capital, and a few changes, you could transform a struggling business into a real performer! Here's what you need to know when buying one.

Are you looking to buy a business? You’ve got the know-how, capital, and desire. But do you have what it takes to turn around a struggling business? 

It's essential to understand the process and what steps you need to take before making an offer. Buying a business can be very rewarding, but it's not something everyone should do. 

So before taking on this kind of responsibility, make sure you have the time and money necessary for such an undertaking. 

Keep reading to get the full checklist to help you along your way and provide some insight into the world of small businesses and entrepreneurship in general.

Find the Best Business Opportunities in the Market

Business opportunities are everywhere. While most people do not have the means or expertise to start a business from scratch, many are looking for turn-key opportunities. 

That is why buying a struggling business can appeal to those with ambition and a love for business. It requires less capital and time than starting a business from scratch but can still be very rewarding.

Prepare for the Decision

Forget buying a business; it's time for you to become an entrepreneur. Before you buy any struggling businesses, make sure this is the road you want to take. It's not like most vocations where you start out small and progress with your career. But, if done right, entrepreneurship can lead to great success.

So, are you ready to put your fate into your own hands? If so, then it's time for you to become an entrepreneur. It can be hard work, but the reward is great. Put in the necessary effort, and you might find yourself providing for a family one day with your business.  Remember, buying a troubled business is not easy. Hence, preparation is necessary.

Find the Best Way to Buy a Struggling Business

There are several different ways to buy a struggling business. The main four options are asset sale, stock sale, merger, and management buy-out. 

Each has its own unique advantages and disadvantages that you must understand to make the right decision. To that, consider the following when looking to buy a struggling business:

1. Assets

2. Stock

3. Merger

4. Management Buy-out

5. Auctioning

Assets

There is a complete transfer of ownership of all assets from the old owner to the new owner. The old owner is not liable for any debt or taxes if they get paid off. 

It is the easiest and quickest way to buy a business, but the price may be more than you can afford. This type of deal is usually best suited for buyers who have plenty of capital on hand.

Stock

Selling some, most or all, their stock to a new owner. This is an easy process and provides the seller with personal time to leave the business on good terms. 

The buyer must own at least 51% of the stock for this transaction to be valid. Suppose you buy more than 80% of stakes. In that case, it may affect the tax-exempt status, and the seller will be liable for any debt or liability.

Merger

One company combines with another to create one big business. However, because this business only exists in theory, the old owners are not responsible for any debts or liabilities. 

Also, this type of deal is usually best suited for buyers who have plenty of capital on hand and can manage a larger company with more employees.

Management Buy-out

This type of transaction is when managers or critical employees buy the shares from the current owner. They must have at least 30% of the total shares for this transaction to be valid. 

Because they lack experience, it's also perfect for buyers with plenty of capital and excellent management of large companies with more employees.

Auctioning

You can also auction off your business or sell it to the highest bidder, but keep in mind that this transaction method is often very unpredictable. You never know who will show up at the auction and what they want for your business.

Also, many buyers may take advantage of you if you are not aware of all the necessary procedures involved. The best way to buy a struggling business is from the current owner. 

This way lets you become familiar with all aspects of the company and ensure that there are no debts or liabilities before signing any contracts. But, ensure you know what you're doing if you decide to go this route.

Know Your Competition

Once you decide about purchasing a distressed business, it's time to start looking for the perfect one. But where do you find them? Is it better to go with personal connections or an advertisement in the newspaper?

When it comes to finding promising companies, word of mouth is often the best form of advertising. If you know successful businessmen, or competitors, who have taken the path, ask them about their experiences and if they would recommend it to you.

If you know anything about the business world, then there's a good chance that you have seen an advertisement or two for businesses that are up for sale. Although these ads can help find a failing business, try to find as much information about the company as before getting involved.

Identify Your Resources

Many resources can help you in buying a failed company, but they may cost money to use. Whether it's for sale by the owner or through an ad, be sure to ask them how much commission you need if you buy the business.

If it turns out to be more than you expected, then you should consider using a different resource.

Stay Focused

After deciding on the best struggling business to buy, invest more in its operations, how you can build it, and not only on the profits. As exciting as this may be, many other factors come into play when buying a business, such as location and suitability.

The most important factor in buying a company is whether it's for sale for the right price. If you have enough capital on hand to buy this company from its current owner, then go ahead and make an offer.

Many companies are currently up for sale because the owners do not know how to manage such a large business, and it's up to you to turn this struggling company around.

Summary

If you have the resources and know-how, then go out and find a struggling company needing great improvement. But, remember to stick to a price you can afford.

Also, if you need more advice on how to buy a struggling business, feel free to contact us, Biznexus at any time. Put our team to work for you.

Bonus Tip! Know the benefits of negotiating during an acquisition

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