Entrepreneurs tend to be the type of people that enjoy challenges. Richard Branson, a famous entrepreneur, once said “I view life as one big adventure. I’m always learning, and finding new things to try and challenges to overcome.” For entrepreneurs, a great way to challenge yourself is by buying a turnaround business.
A turnaround business is a company that for various reasons is not meeting its potential for success, and the seller is highly motivated to sell the company. Some of those reasons could be that the owner is struggling with new technology that is becoming more commonplace in their industry, or that they haven’t found the right marketing avenues for their business. They also may simply be getting older and don’t have the energy to run the business at its full capacity anymore.
These distressed businesses may need a more experienced and energetic entrepreneur to turn the operations around and realize their full potential. There are many advantages to taking on this small business challenge, and the return on investment can be very rewarding! Here are just a few of the benefits to buying a turnaround business:
Low Investment Cost. Turnaround businesses are some of the most affordable businesses on the market. This translates to a low entry price, and therefore a low risk investment. When starting a business from scratch, the cost of inventory, FF&E, and build-out of a location can quickly skyrocket to a seemingly astronomical number, and can be very difficult to cover without incurring a large debt. A turnaround business will already have a location built out, with fixtures and inventory in place for the business owner to benefit from. This means your investment can be used for growing the business instead!
Location, Location, Location. With rent prices increasing regularly in Denver and the surrounding areas, it can be extremely difficult to find the right location for a business. Turnaround businesses have an established location with a lease already in place, and in some cases have locked in favorable lease rates for the next few years. This not only saves money for the business owner, but it also saves the time and headache of searching for a location and negotiating the lease.
Established Customer Base. While a turnaround business may not be profitable, it is still an established business with a client base already in place. Many of these businesses have great online reviews and loyal customers to work with. This can be an invaluable foundation to build on; it just needs the right person to turn a good foundation into a great revenue generating business.
Cash Flow. Taking over a business that is already generating revenue can save a lot of time, even if the cash flow is currently negative because of high expenses or cost of goods. Often a new owner can bring an improved vision into the business and identify innovative ways to get the cash flow to positive and reduce expenses.
Growth Opportunities. A distressed business may be unable to effectively reach new target markets to grow their business. They often have unexplored revenue opportunities that a savvy investor could find and implement to grow the business quickly. Sometimes, this can be as simple as creating a website for the business or establishing a social media presence.
If you’re an entrepreneur looking for a new challenge, and want to put your entrepreneurial experience to good use, a distressed business could be the path for you! Turnaround businesses are a low-risk investment with a high potential for return. In addition, there are intangible benefits like having the satisfaction of seeing a business go from struggling to profitable due to your own effort and determination. These businesses have motivated sellers that are ready to execute a fast transaction and get you into your ownership role as soon as possible.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!