Why Buy a Second Business in the Same Industry?
“One of the quickest and most cost effective ways to grow a business is through…acquisition.”
Today many business owners think about expansion, but frequently overlook one of the fastest and simplest ways to increase sales and profits-by buying a second company in a similar or complementary industry.
There are many advantages to buying an additional company, some of which are described below While every individual and organization is unique, as an experienced business owner you owe it to yourself to carefully examine and consider whether this option may offer you a viable method of growing your business.
Facts to Consider
As the owner of a successful business you have no doubt over the years acquired a great deal of knowledge and expertise in many different areas. These may include managerial, administrative, and general business skills and knowledge as well as expertise and experience in your field.
As your experience, skills and expertise have grown, it is likely that the day-to-day running of your company has become smoother and more predictable than when you first started out. An infrastructure has been established and systems for the daily operation of the business are in place.
You may be at a stage in which you wish to grow your business but are uncertain as to how to go about it. Perhaps your location and/or current markets will not support the type of growth you are seeking. Buying a second company in the same field will give you the option of having a second location or, if you choose, to merge the second business with your existing company into a larger, expanded organization.
Advantages of Buying a Second Business in the Same Industry...
1. Learning Curve is Minimized
You are already knowledgeable about your field or industry, so you can “hit the ground running” with the second company. Your industry knowledge and experience will enable you to successfully grow your holdings while minimizing pitfalls that you may have avoided or previously experienced.
2. Increase Sales and Market Penetration
Naturally, increased sales are a major goal in any acquisition. An added benefit to buying a company in the same industry is the opportunity to increase your penetration in your existing markets and/or to gain entry into new markets in which you are not currently doing business.
3. Economics of Scale
In addition to increased sales, there are frequently financial and operational efficiencies that can be realized by owning or combining two or more facilities. By consolidating certain functions, such as accounting, purchasing, payroll, warehousing, etc., significant savings can be achieved, along with a favorable impact on bottom line profits.
4. Capitalize on Your Good Name and Reputation
Chances are you are already known in your industry by many people – customers, suppliers, the general public and your industry’s unique community. By purchasing a second company you will be able to transfer the good will and name recognition you already enjoy with your existing business to your new operation. There are many marketing and business advantages that can be gained by using this approach to expanding your business.
If you intend to merge the second business into your existing operation, your established name and reputation will go a long way toward ensuring a successful transition, particularly with customers and suppliers.
5. A Cost Effective Method of Growing Your Business
There are many ways to finance the purchase of a business. Your established success in the same industry puts you in a positive position. We are in the marketplace every day and with our years of experience and industry contacts, know which lenders are doing deals, and how to get things done in a timely manner.
Is Buying a Second Company the Right Option for You?
Increased sales and profits, the ability to consolidate overhead, and frequent owner financing are among the many advantages that make buying a second company a cost-effective and profitable method of business expansion. Because of all consolidation of overhead, a strategic buyer is normally buying a business significantly less than a first time buyer.
Only you can answer this question; however, we believe it is an option worth serious consideration.
At Empire Business Associates, we are here to assist you. Our national network, years of experience and proven track record attest to our ability to help entrepreneurs like you achieve your goals.
