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When things go well for an entrepreneur’s first business, there is a certain point when it becomes clear that the entrepreneur is ready to embrace the next phase of their entrepreneurial career. If the finances are stable and a business has both a loyal customer base and a dedicated staff who are committed to the company, then it is natural that a passionate entrepreneur to consider looking beyond the existing operations of their company and contemplating what comes next.
If you have reached the above stage, then your first instinct will likely be to expand your existing business in some way. Perhaps you could add a new product line, or expand the business geographically to a new location; options which can, of course, work very well. However, there is another option that you may have overlooked: buying another business that is already established.
What are the benefits of buying another business?
- A different challenge. Expanding an existing business is undeniably a challenge in and of itself, but it is a very familiar challenge; the same business, doing primarily the same things, but on a slightly larger scale. Buying a new business, with an entirely separate company culture and way of operating, can allow you to use your entrepreneurial knowledge but place it in a wholly different setting.
- Diversification. Instead of buying a business in the same niche as your existing company, you could buy an entirely different type of business in order to diversify. For example, some businesses – such as real estate – are heavily reliant on a robust domestic economy, so buying a second business that is considered to be more recession-proof can help to offset the risk posed by any uncertain economic times you may experience in the future.
- Less disruption to your existing business. Expansion can be a trying time for any business, so avoiding a direct expansion that has the potential to disrupt your existing business is incredibly beneficial. Your current business can simply continue undisturbed while your overall business portfolio – and thus your revenue and profits – continue to grow.
What do you need to buy another business?
- Time. Unless you are planning to entirely hand your existing business over to a management team, buying a second business will inevitably place significant demands on your schedule.
- Legal assistance. Unsurprisingly, buying a business is incredibly complex, so you will need to find the right commercial solicitors to ensure the process goes as smoothly as possible.
- Funding. Buying a second business tends to require a similar process to obtaining startup funding for any business; by applying to banks or directly to investors. However, the fact that you already own a successful business will usually go in your favour.
If you would prefer to focus on expanding your existing business in some way, then that is, of course, a completely reasonable choice. However, if you have been seeking a fresh challenge and like the idea of beginning to build a business portfolio, then you may find that this route could well be the perfect choice for you.