Entrepreneurs

Council Post: Why Now Is The Right Time To Acquire A New Business

By Codie Sanchez, founder at Unconventional Acquisitions. Venture capital and private equity.

More than 55% of businesses on Yelp that closed during the pandemic have closed forever.

This is a tragedy.

But it’s also an opportunity.

At Unconventional Acquisitions, we teach others how to acquire small businesses as a way to employ Americans again and grow wealth unconventionally.

Inside of every closing business, there is some value — from the machines to the customer list to the location to the signs to the website. I could go on.

However, the majority of small business owners shut their doors instead of selling. They are beaten down and tired. They have just lost their business baby. According to Yelp’s Q2 2020 Economic Average Report above, 72,842 of the businesses on its platform had closed since the start of the pandemic. In July alone, that was 15,770 restaurants, 5,454 bars, 12,454 retail stores and 4,897 in beauty.

What if you could come in and give these businesses an out? Remember, a business is more than its profits. You have assets here for sale too, such as people, places and processes. You have a platform to plug into, and at a massive discount.

In this type of sale, you are acquiring the assets of the business rather than an ongoing operation and its cash flow — the essential parts that allow you to continue operating and growing. When you buy these instead of these and the marketing engine, profits, etc., your price is discounted severely. So the model’s a bit different. 

One of our clients, a gym owner, helped a fellow gym that was closing its doors by buying assets from it. We hatched up a plan in two parts: a customer transfer and an employee transfer. Here’s how to do it:

1. Reach out to all the owners of the businesses in your sector that have closed and tell them you want to help recoup some of their costs.

3. Ask the owner for their Rolodex of clients, and give the new owner 50% of all the revenue from their clients for the next six months or a year. (Look at your individual cost of goods sold to figure out what you could afford here). 

4. You could even consider bringing the owner into your business and handing their clients over. Or you can give them a lifetime supply of your product as a way of welcoming them to the family. 

5. Help the owner draft up an email/flyer/social post for all their clients to help them explain that they didn’t want to leave their clients without a new community. 

You just acquired all this business’s customers for nothing. You gave them a home, and you gave the dejected owner a win.

The same process applies to an employee transfer or an “acqui-hire.” Ask the owner for their help in transferring their best employees. You could even give the owner and the employee a percent revenue share of profits.

If you run a business and you aren’t out there trying to buy up your closing competitor, be it a gym, restaurant, bar, retail shop or more, you are missing a huge opportunity. 

And don’t forget, this is a win for the seller too. Bankruptcy, an outstanding lease, debt, “failure,” legacy and ability to keep their employees are all real and painful downsides for business owners who are looking to close their business. 

Economic recessions are the great equalizer. What if you could help a closing business deal with a tragic situation and build up your business at the same time? You can!

 

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