Make Money From Buying A Failing Business? Here’s How To Do It!

Make Money From Buying A Failing Business? Here's How To Do It!

When people start a business, they do so with the aim of making it a success. For the most part, that goal gets achieved. But, some unlucky people find they have no choice but to stop trading. If they have regular customers, business owners may instead opt to sell their companies.

On the face of it, you might think that buying a failing business is a bad idea. After all, if it’s not making a profit, what’s the point in wasting money buying it!

You might not believe it at first, but it’s possible to turn around a failing business and make it profitable. Here are some tips on how to do it.

Don’t buy a business that’s in really bad shape

One thing that I should make clear is that you should proceed with caution, for obvious reasons! Don’t assume that you can turn around any failing business. You need to inspect the company’s financials with a fine tooth comb. Avoid firms with outstanding liens or payroll. And walk away from enterprises that are getting sued by people!

What you should do is look for companies that aren’t making a profit for the following reasons:

Those are just three of many examples of firms you can make profitable again. You should also look for companies that have a strong and loyal customer base. That’s because you can build on an existing income stream.

Make Money From Buying A Failing Business? Here's How To Do It!

Make the right deal

Buying a business – failing or not – isn’t just about paying the asking price. It’s about making a deal that both parties are happy with. For example, you could ask the seller to finance part of the sale.

That’s right; they could possibly end up owning a stake in what will be your new business until you pay them back. That way, you don’t need to pay a big upfront fee. Another option is to give them a cut of your sales, for example 10%, for the next 12 months. This is a useful tactic if you’re negotiating them down on their asking price.

Bring the company into the 21st century

Many firms fail because of their outdated business practices. Believe it or not, some companies still do everything by pen and paper! Here are some ideas to upgrade the technology and make the business more efficient:

  • Upgrade the internal software used. Does the company use a DOS-based invoice system with outdated printing equipment? Hire a firm that offers legacy migration services. You can then use a modern cloud-based invoicing platform;
  • Upgrade the computers. If the company runs old Pentiums that have Windows XP or earlier installed, scrap them. Buy modern systems that can run modern software. It’s a costly investment, but it also means employees can be more productive and have the proper tools to get the job done.

Curate a killer marketing strategy

Did you know that many companies fail is because their marketing campaigns basically suck? It’s likely the business you want to buy is suffering the same problem.

Don’t worry because it’s something that you can fix! Be sure to create a multi-channel marketing strategy. That means use a variety of offline and online advertising methods.

Starting a business from scratch, or buying an existing business (that is doing well or poorly), involves a lot of research, planning and money. Look at all your options and the overall cash outlay before making a commitment.

Photo Credits: Pixabay

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