You’ve Bought a Small Business. Now What?
If you’re a venture capitalist looking to invest in a small business idea, you don’t necessarily have to go toward a trendy start-up, but perhaps start with something simple. You can be your own boss, and achieve rewarding everyday work even if you’re not venturing into the corporate world. Small businesses such as corner stores and landscaping businesses are usually less risky anyway. Even so, the Small Business Administration says half of all new businesses fail within five years.
Buying an existing small business means you already have a client base. In recent years, small-business acquisition has been growing. This is evidenced by the fact that small business loans totaled $8 billion last year, up from $6 billion in 2014, much of that going to those buying up operating companies. Investors and business owners are partnering up more and more, with one fronting the money and the other handling the day-to-day operation. Each one offers something the other cannot.
This is just one part of acquiring a business and keeping the original owners as partners, and there are many advantages and disadvantages of this arrangement. First of all, you have someone who deeply cares about the daily operation of the business. However, it can be hard to give up ownership and calling the shots. That said, these partnerships are giving small business owners a chance where they otherwise wouldn’t have one. This allows each partner to focus on their strengths rather than scrambling to fill all roles.
When you buy a small business, rather than create a start-up, you’re basically taking on someone else’s problems, procedures, decisions and company vision. How do you best get there? That’s something you have to work out over time.
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