When you make the decision to expand your e-commerce business, it can get complicated. There are various reasons you should, but more importantly, there are various reasons you should not. Entrepreneurs often get distracted while building their businesses. Shiny object syndrome is a real weakness! Many entrepreneurs want to do all the things. When looking to buy another business, Wizards of E-com has a few tips to consider before taking this financial leap.
Things to Consider When Looking to Buy
Consider how much of yourself you would have to give if you expanded into different territories. Do you have the physical and mental bandwidth to handle it? Think about how much time it will take through the acquisition. It will take a large chunk of time and resources from the next quarter to close the deal. This can hurt your business financially and end up causing more debt. Other things to consider include what products they sell, what type of leverage you have within the purchase, and understanding why they are selling.
Understand Their Reputation and Why They are Selling
Do some digging and find out why the owner decided now was the best time to sell. Market research into their product and business practices will help you decide if this is a good time to buy. No need to invest in a failing business. Bad business practices can follow the new owner. The business is associated with a brand and not a person, so even if it passes to new hands, a reputation is not so easily recovered.
Are the Products Similar to What You Offer?
When adding to your empire, consider the products the business sells. Are they similar to what your business offers? This is a great benefit to advertising. Having products that cross over can increase your customer base. New and old customers will come to your shop. If this isn’t the case, it can hurt your business.
Leverage tends to have a negative connotation, but it can be beneficial when it comes to buying and selling. There are two types of leverage that can affect your business dealings: micro and macro. Macro leverage is debt over assets. This means if the debt is greater than the assets, it will negatively affect your ability to buy. Micro leverage is when you have space to negotiate. A seller may have a certain time frame, terms, or beliefs that mean they need to sell quickly. Buyers can use this to their advantage for a good deal.
Think Before You Buy
Consider if you have exhausted all avenues of your current business. Tapping into the potential of your current business is important before investing in another one. Purchasing another business is costly and time-consuming. Before seeking to expand, make sure you invest all the money and resources available into your existing business. The time, cost, and resources can bankrupt your new and old business, leaving you with nothing but massive debt.
Wizards of Ecom has a large variety of classes, tips, and workshops to help you build and expand your business.