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Buying your business for MSPs. Potential pitfalls.

Time. At the very least, even if all your ventures are largely problem-free, there will be a significant overhead in terms of time sacrificed. Unlike money, time cannot be replenished, and once it’s gone, it’s gone. Every hour spent on a potential purchase incurs the opportunity cost of time that could be invested in improving an existing profitable enterprise. When looking for opportunities, it’s likely you’ll have to kiss a lot of frogs before the ideal one comes along. Even when the right one comes along, the sale often doesn’t go through for various reasons beyond your control. If a lot of time has already been clocked up whilst undergoing the various checks and due diligence, this can have a motivational impact as well. Furthermore, even after a successful purchase, a lot of time will be required to complete the deal and implement the requisite changes to the new acquisition.

Money. Again, in terms of money, there is an opportunity cost even if a transaction is successful. at least initially, until cash flow is forthcoming. If the purchase doesn’t go ahead, there will be some losses incurred as a result of costs associated with due diligence and professional fees, etc. If the purchase does go ahead and the new business acquisition fails, you could lose your entire investment. Furthermore, if there were personal guarantees involved, you could lose a lot more.

Liabilities. When someone acquires a new business, they are also acquiring that company’s liabilities. Tax liabilities, creditor liabilities, legal liabilities, there are a lot of responsibilities. It is possible to purchase just the assets rather than the company itself, but even then, one must be careful that the assets aren’t already encumbered with debt. If a customer, supplier, staff member or member of the general public is suing your business, they don’t care that the owners are new and weren’t there at the time of any issues. They will simply be seeking compensation from the business and potentially the owners as well. It is not unknown for the new owners of a business to go to prison for issues caused by the previous owners. People. Where people are involved, things can easily go wrong or turn sour. The vendor may simply copy all your ideas and not sell your business. They may sell last minute to a competitor. The staff may decide they want to leave, potentially to a competitor. The vendor may not fulfil crucial parts of their contract, making operating the business almost impossible, yet difficult to sue. In short, people are a funny lot and they don’t always play ball. The reality is that a large percentage of acquisitions fail. But for entrepreneurs, it’s all part of the challenge and the cut and thrust of business in general. It’s what makes the success so much more exhilarating.

MSP marketing in bite-sized bits. It’s easier than you think with MKLINK. To get more of MKLINK’s MSP MBA Marketing and IT training resources, make sure that you’ve registered for your account for free now at www..mklink.org.