Making The Most Of Your Money

3 Things You Need To Do Before Deciding If A Merger Or Acquisition Is Best For Your Small Business

30 June 2019 by Glen Robinson

One of the more popular ways that small businesses grow is either by merging their operations together with another small business that offers similar or complementary services or through an acquisition, where you purchase another small business and absorb their customers and equipment. Before you move forward with pursuing mergers and acquisitions, there are a few things you need to do.

Assess Your Business's Financial Health

The first thing you need to do is assess your business's financial health. You need to sit down and look at the books in great detail. You need to see if you have enough working capital to support your current business and if you have the cash on hand to pay another business. You need to have cash on hand, or some good lines of credit, in order to afford to acquire another business. Don't think you can escape the financial side by going through a merger instead; both processes come with a cost, and you need to make sure your business is strong financial and will not be brought down by trying to grow your business.

Asses The Potential for Growth

Next, you need to assess the potential for your business to grow. How will acquiring another business help you grow? Will you be gaining new customers? Will you be gaining access to new products? Will you be able to provide a greater degree of services to your clients?

You need to really look at what the market is like and what the demand is for the product or services that you supply and would supply if you were to grow your small business through a merger or acquisition. You need to make sure there is a need for what you want to do before you do it.

If you want to pursue this further, you will need to assess this again once you have an idea of the specific businesses you want to collaborate with. However, assessing the market before you start looking for businesses to merge with or acquire will allow you to determine if now is the right time to make this type of move.  

Bring in a Professional

If you want to move forward, you need to bring in a professional to assist you who specializes in mergers and acquisitions of small businesses. They are going to do their own assessment of your business's financial health, and they will help you find the best businesses that you could merge or acquire to grow your business. Then they will help with the formal process as well.

If you want to grow your small business through a merger or acquisition, assess the financial health of your business and evaluate the market need for your new vision. If you want to go forward, bring on a professional team to help with the process.

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