Opportunities in broken businesses

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Reviving a broken business. Photo by Polina Raevskaya on Unsplash

Someone who was doing business with us asked the other day about opportunities in this economy. Businesses that were once doing reasonably well in the so-called better times have gone bust or are limping along.

One idea that intrigued him was when we spoke about broken businesses.

The idea is to get hold of a broken business and fix it up.

A successful entrepreneur used this approach to accumulate wealth rapidly. He surveyed the market for businesses and came across a food outlet that was being run to the ground by the business owner.

It’s understandable because this business was purchased by the father and given to the son.

Unfortunately, the son was hardly ever around wanting to enjoy the good life. This lack of care and attention to the food business meant that it was hobbling along with a certain future – it would close down once all the money had run out.

The entrepreneur made an offer for this ailing business and the offer was accepted. The entrepreneur immediately set about turning things around. For a start he was present at the business. He did a careful screening of costs, pruning out all unnecessary expenses. Then he worked on bringing in new blood into the business – and what I mean by new blood is cash. He paid attention to the quality of the fast-food, motivated staff and tweaked the specials to attract more customers.

But the entrepreneur never intended holding on to the business for years and years. His was a turnaround strategy to create value in the business and make it into a productive asset. 

Eventually he got a lucky break – a large international fast-food chain was looking at buying local fast-food outlets to achieve rapid growth in the market. The entrepreneur was able to cash in at a much higher value than what he originally got the business for.

He could have also found a private buyer who would have paid full value for the fast-food outlet. The point here is that the entrepreneur went into this business, cleaned it up and made it into a cash generating machine.

It’s not the kind of opportunity that anyone can go for. One of the prerequisites is that you must have business acumen, possess an appetite for risk and know exactly what you are doing.

If you are looking for opportunities in these times and want help, let us know.

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