Partnership for the Good of Your Business

Four questions to ask yourself before a buyout

On Behalf of | Nov 15, 2019 | Business Law |

When you have a small business, you hope to have it grow and be successful. But eventually, you may reach the point where you can’t expand anymore without running into your competitor. If you want to increase the success of your business, buying out your competitor could be a good option.

But before you purchase, you want to make sure a buyout will improve your business. Here are a few things to consider before buying out your competitor:

  • What does my competitor have to offer? – Your buyout should create advantages for your company. Your competitor may have clients or customers that your current business doesn’t reach. They may have an established reputation or brand that you can use to your benefit.
  • What are the costs involved? – You know how expensive running one business can be. Taking over another company can mean increased insurance costs, more payroll, increased maintenance fees and more. And if your competitor’s costs landed them in debt, you may find yourself losing more money than you’re making.
  • How difficult will integration be? – Between customers and employees, you can lose valuable people in a buyout. If you change too much of your competitor’s business, you may lose the people that make it profitable.
  • How will you pay for the buyout? – Raising money for a buyout may mean seeking more investors. And investors may want partial ownership or management rights.

Buying out a competitor can be a risky situation. You may wind up losing your whole business if something goes wrong.

But if you take precautions and manage your risks, taking over another company can grow your business exponentially.


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