Flipping houses is a very common strategy for property investors these days. It involves buying a cheap house, spending some money on it to improve the condition, and then selling it on for a profit. Investors will repeat this process over and over, making bigger profits each time. If you can balance the costs properly, flipping houses is a great way to earn a living.
But did you know that you can do the same with businesses? A lot of people buy businesses so they can run them for a long period and earn a profit. However, if you purchase a business and make it more profitable, you can sell it on for a big profit. The margins involved with businesses are often much larger than houses, so if you have enough money to invest in the first place, this is a great investment option.
However, improving a business and selling it on is more difficult than renovating a house and there is the potential to lose a lot of money if you don’t get it right. If you want to start flipping businesses, here are a few key tips to keep in mind.
Do Your Due Diligence Before Buying A Business
One of the key reasons why house flipping is so popular is that it’s very easy to research house prices. You can look up sold values for properties in your area, so you know what price range to look for when hunting for deals. Unfortunately, very few people do the same with businesses. A lot of investors simply buy a business without looking into whether or not it’s profitable enough. If you want to flip businesses then this is something that you need to change immediately!
You need to do some in-depth research into the industry and the market for the business. You then need to do your due diligence on the business and carefully assess the finances of the company that you’re looking to purchase. You may need an accountant or business broker to help with this if it’s your first time, but once you understand the process, it’s very easy to do on your own. Take a look at their financial history and find out how much money they generate. If you can get this information in advance then that will give you a huge advantage over other buyers when negotiating from a position of strength.
Look For Local Businesses
One of the reasons why house flipping is so popular is that it can be done from anywhere in the world. People have been known to buy and sell properties on other continents without too much effort. However, as a business flipper you should always look for local businesses first. Flipping a business takes a lot more legwork than selling a house, so it’s best to stick with nearby companies. Do an online search for businesses near me for sale and you’ll find plenty of options. Working with a local business means that you can be hands-on and keep an eye on things.
In order to run your business properly you need good relationships with suppliers and customers. If you travel too far then this becomes difficult. At the same time, travelling will eat into your profits because everything costs money – petrol, accommodation etc – so stick nearby.
Find Companies With Poor Management And Large Customer Bases
This is one of the keys to making big money through business flipping. If you can find a company with high turnover and poor management, then you’re on your way to success.
Businesses that are poorly managed will lose money, so they’ll be put up for sale. That doesn’t mean you should just find the first failed business you can and buy it, though, because it’s unlikely you will flip it. If a business is failing because it’s badly managed and nobody is buying the products, that’s not a great prospect. The key is finding a company that does have a good customer base but is still suffering due to poor management. The larger the customer base of the business, the better your chances of earning a lot of cash when flipping companies.
Buying a business that is in a terrible position is the same as buying a house that is falling apart and then trying to flip it.
Only Fix What Is Broken
When you buy a business, it’s tempting to look at everything and say “I will have to fix all of this”. But that is the wrong way of looking at things. There are many businesses that failed because they had grown too fast or bought up new properties in quick succession. Some companies are struggling because they haven’t done enough to develop new products. Whatever the reason, you should only fix what is broken in the business. If you change too much, you risk alienating existing customers and damaging the things that are actually working about the business.
Focus On Rebranding
Some businesses fail because they have messed up their branding. If you look at some of the most obvious flops in recent years, such as New Coke, then you will see that they failed because people were used to a particular taste and didn’t want to try something new. The first thing you should look for when buying a business for sale is whether or not it has strong brand recognition. If the products are well received but the company isn’t doing very well, it could be down to a branding problem.
When you take over the business, do some market research and work out what kind of branding your target audience responds to. Then, you can start working on rebranding the company. Buying up a business and then overhauling the brand is a good way to breathe new life into it before selling it on for a big profit.
Flipping businesses can be a great way to earn a full-time living once you get it right. The key is having a good eye for companies that aren’t doing brilliantly but still have a lot of potential. When you learn to recognize them, you will start making a lot of money.
*This is a collaborative post