Pitfalls To Watch Out For When Buying A Business
Establishing your own business is hard. Buying your own business is no easier, mind you, but it comes with the leg up of having a business ready-made for your leadership and ownership. Also, if things go south, you can hopefully recoup your losses by selling the business down the line.
Business expansion typically involves absorbing smaller businesses and workforces unto the huge umbrella of your own corporation, leading to your own megacorp where the individual businesses serve as its multiple divisions.
The Pitfalls of Purchasing a Company to Watch Out For
Adding a new company to your portfolio has many advantages, but you should watch yourself for the risks and disadvantages or else it might evolve into a bad deal. As for the pitfalls to watch out for when buying a business, here they are.
• Mistakes in Rebranding: Owners tend to have a grace period where they have to familiarize themselves with the new company, its culture, and its branding. Even if you have to let go of most of the workforce, you still bought this company with its own built-in branding and leadership.
• Trying to Fit a Square Peg into a Circular Hole: The temptation is great to force the new company to adopt your existing branding so that they mirror each other in “corporate synergy”. This might be a mistake. Retaining the branding might be more to your benefit.
• Don’t Just Discard Generations of Reputation: It was a mistake for Coca-Cola to change its flavor to New Coke in light of what the old formula represented for generations. It’s also the same when you buy an age-old company with its own identity you can use instead of discard.
• Challenges in Business Integration: The company you’ve bought might run things differently from its current parent company. This can make integrating its workforce, culture, and ideals to be in line with yours a challenge. You should have due diligence at integration, to the point of making hard decisions on what to keep and discard after the buy-out and merger.
• Failure to Clear Liabilities of the Seller: Due diligence on your part also includes checking out any unrecorded liabilities, debts, and so forth of any company you wish to buy out or do mergers with. The disaster that was the America Online and Time Warner merger failed because of undocumented problems that later resurfaced and buried the companies.
• Slow Down and Resolve Issues: Don’t be blinded by the great potential of the merger to the point of counting your chickens before they hatch. Take time to get the seller to disclose unrecorded liabilities and handle them. Don’t proceed with any sweeping changes until these underlying problems are resolved.