If you’re considering buying a business to start your adventure in entrepreneurship, may we suggest you consider buying a distressed business? A distressed business offers the unique opportunity to buy a business with some added special benefits.
To start, let’s define “distressed business.” A distressed business is a company that for various reasons is not meeting its potential for success, and the seller of which is highly motivated to sell the company. The factors that can cause a business to become distressed are poor management, or ineffective marketing strategies or intentional factors like the owner has decided to limit the business as they prepare for retirement or they may be relocating.
Considering a distressed business for acquisition is a great opportunity to purchase a business and really make your mark on it, while risking a low value of investment, but at the same time opening yourself up to an opportunity for high reward. In addition to the potential of high ROI, buying a distressed business still comes with the high probability of success not seen with startup businesses, where 50% of them fail within their first four years.
Another great benefit of a distressed business is that they will have cash flow, a key requirement of a successful business. Even if the business’s cash flow is negative due to expenditures or high debt, this is a positive quality. It alludes to the fact that with changes to operations the business can produce positive cash flow. And the debt of the previous owner will not transfer with the business.
Buying a distressed business offers the opportunity to buy a business with limited risk and a very high potential for reward. If you are interested in speaking with a broker about buying a business, schedule a free consultation today, or if you would like to receive turnaround business listings straight to your inbox, join our monthly newsletter.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree in Global Interactions from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high life!