3 Questions To Ask Before Taking Over A Closed Business
At a time when small-business owners are busy responding to pandemic challenges, it’s easy to overlook the possibility that opportunities are out there too. One of those might be taking over a business that’s closed. Some companies may have successfully tapped a market but just didn’t have the resources to outlast the pandemic. If you have the capacity, they could be a way to grow your business. But before you act, start with these market-oriented questions to determine if taking over a closed business makes sense for you.
How compatible is it with your current business?
Think about how the closed business matches up with yours. Did they target a similar customer? Did they offer similar products and services? The answer will get you thinking about what more you will need to serve their consumers.
For example, an Asian restaurant assuming a similar eatery could easily offer compatible menu items with few adjustments. However, the same restauranteur might have to buy more equipment and market to a different customer for a bakery.
Be careful about automatically dismissing a business in a different category. It may not be a barrier if it’s compatible with your business. For example, the Asian restaurant might buy a store offering teas. Their products complement each other and appeal to similar customers. So they can be more easily integrated.
Why did the business close?
The pandemic may have been the ultimate reason for the business’ closure but get a sense for other contributing factors. Think about the internal and external environment you will inherit as the new owner. A SWOT analysis will help you answer this question.
When researching external factors, look at their competitors. A rival business may have already assumed their customer base so you’d have to compete to regain them. Additionally, look at their existing suppliers. The supply chain may have consolidated making it difficult to reliably offer the same products.
Internal factors like a weak social media strategy might have added to their closure. If you have a strong presence in that space, you may be able to leverage your existing followers and develop new relationships. Another internal influence might be the lack of diversity in their customer base. You may have to expand your marketing reach if most of the revenue came from just a few clients.
The idea here is to uncover the critical success factors. Then the question becomes—Do you have the knowledge and resources to provide them?
What marketing resources still exist?
Depending on how long a business has closed, you may inherit marketing assets that will give you a leg up. For example:
- Good name recognition lets you focus on sales rather than having to first build a new brand.
- A prime location provides access to a large customer base.
- A website that already offers online sales gives you a platform to sell to COVID-weary customers who are reluctant to buy in a retail store. You may be able to leverage the platform in your existing business to give more purchase options to those customers too.
One of your biggest marketing assets might be the staff. If the business had employees, what are the prospects of rehiring them? A seasoned employee has the knowledge to speed up the reopening process. They are familiar with the products and services and can market to former customers.
These market-related questions are a good place to start when considering whether it makes sense to take over a closed business. But it’s also important to evaluate financial and legal factors. This checklist from SCORE can help you examine these areas as you size up a potential opportunity.