Buying another business — a competitor or a supplier — can compress years of organic growth into a single transaction. It’s also one of the easiest ways to overpay for something that doesn’t fit, so it pays to go in with a clear head.
Buying a supplier
If a supplier is critical to your output, owning them removes a layer of mark-up, gives you more control over quality and timing, and can open a new revenue stream by selling to others in the same position you used to be in.
Buying a competitor
Acquiring a rival removes them from the market and hands you their customer base in one move. Beyond the obvious market-share gain, you may pick up useful staff, equipment or premises — sometimes for less than buying the same assets new.
Working out what it’s actually worth
- Get an independent valuation rather than relying on the seller’s figure.
- Look at the trend in profit over several years, not just the last one.
- Factor in anything intangible — exclusive supply agreements, locked-in contracts, a strong location.
- Focus on what the business can realistically earn under your ownership, not its past under someone else’s.
Before you sign anything
Understand exactly how the business makes its money, what you’re inheriting in terms of staff and culture, and whether the numbers genuinely stack up once your own costs are added in. This is exactly the kind of decision worth bringing your accountant into early — a second set of eyes on the financials can save you from a very expensive surprise.