In the wake of recent events across the Atlantic Ocean, there's been much negative speculation in the world of business and trade. I'm hesitant to write my political feelings on my personal blog, but I do feel that business may not proceed as usual! I thought perhaps we could all benefit from a good educational business blog during this uncertain time.
So, you want to buy a business. How do you spot a prime acquisition target? I've acquired numerous businesses over the years and have come to have a knack for spotting the "diamonds in the rough." While they may take a little longer to find, they do exist! Here are the 3 things I look for that make a prime acquisition target"¦
1. Small number of employees
My favourite kinds of businesses to acquire are businesses that only have a few employees. This usually means they are less inclined to pick up and leave when the business is sold.
Also, a small number of employees means that there is minimal overhead cost to acquiring the company. The key is to find the sweet spot where you can maximize profits, yet still keep the company small.
2. Scalable & profitable
How do you know if the business you’re looking to acquire is scalable? Scalability is a characteristic of a system, model, or function that makes a company able to preform under an ever-increasing workload. A business that scales well will be able to maintain – or even increase – its level of performance or efficiency when tested by larger demands. E-commerce and marketing companies are both great examples of scalable, and therefor profitable businesses.
3. Niche market
Last but certainly not least, a niche market is also important if you're considering purchasing a business. Does the company already have existing clients? Does the business have a good relationship with these clients? People are what makes you profitable, and you need to take a good look at the seller's books to determine if there is a niche market to sell to.
Having only a few employees, while still being scalable and profitable, and already having a solid market to sell to are just a few traits that make a business desirable for acquisition. In my opinion, these are some of the most important traits of any business in order to be profitable.
Still can't decide to buy or not? Feel free to tweet me your business questions @GilesCadman. Cheers!
Giles Cadman is Chairman of The Cadman Capital Group, a group of cohesive, complementary companies, operating in the international trade, retail, leisure, and investment markets. Learn more about Giles.