Pros and cons of buying a distressed business 🤔

Ever thought about buying a distressed business?

It's a wild ride, let me tell you. 

We're talking high risks, but potentially (if you know what you’re doing) big rewards.

Now, you might be thinking, "Why on earth would I want to invest in a struggling business?" 

Well, to be fair, there are a few benefits:

These businesses often come at a steep discount. We're talking serious bargains, and the financing can get pretty creative. 

If you play your cards right, you're looking at putting down maybe 10-30% of the price, with the seller financing the rest. 

(They’re essentially saying, "Hey, I believe in this business enough to bet on you turning it around.")

Sound tempting?

Well before you start dreaming of your new yacht, let's talk about the reality. 

Turning around a distressed business is not for inexperienced or the faint of heart. 

You're basically trying to stop a runaway train and get it moving in the opposite direction. 

Depending on the circumstances, it can be tough. Really tough.

You've got to be a jack-of-all-trades – part motivational speaker, part systems guru, and part financial wizard. 

You'll likely need to make some tough HR calls, like letting go of folks who aren't cutting it and bringing in fresh talent. If the business is in the red, you'll need deep pockets to keep things afloat while you work your magic.

Managing all of this is a huge investment of time and effort. Work-life balance can become impossible.

This isn't something you can manage between rounds of golf. We're talking all hands on deck, 24/7 kind of commitment. 

It's intense, to say the least.

So, first thing’s first – take a good, hard look in the mirror. 

Are you cut out for this? Do you have the experience to reverse the business’ decline?

If you're not sure, consider teaming up with someone who's been in the trenches before.

That old saying about surrounding yourself with people smarter than you? Yeah, you’ll need to do that. 

Build a dream team of advisors, industry experts, and experienced managers. Get them on board before taking the plunge. 

Trust me, you'll need them.

Next up, dig in and play detective. You need to figure out why this business is in hot water. 

Is it something fixable, like outdated systems? Or is it something more dire, like a dying market? Knowing this (and being intellectually honest about it) will be your North Star as you plot your course.

Think about how you'll stop the bleeding, shore up operations, and get the business back on its feet.

And for the love of all things holy, make sure you've got enough cash to see it through. 

Running out of money halfway through is like running out of gas on the highway – not fun, and potentially disastrous.

In case you can’t tell, investing in distressed businesses is not everyone's cup of tea. 

It's more like a quadruple espresso shot – intense, anxiety-inducing, and somewhat exhilarating if you’ve already built the tolerance up.

It takes a special blend of skills, knowledge, resources, and let's face it, a little bit of crazy to pull it off.

If it’s something you’re dead set on, just remember to go in with your eyes wide open, a solid plan in your back pocket, and the guts to see it through.

But, if you’re looking for more comprehensive, step-by-step guidance on acquiring a profitable business, fill out our Investor Survey so that we know what kinds of deals and information you’re interested in receiving.

And keep tuning in every Tuesday and Thursday for more acquisition tips and strategies!