When you buy a failed (or failing) business you’re not getting a ready made, working successful business. Instead you’re buying an opportunity, two opportunities in fact. The first is the opportunity to turn the failed business’s customers into your customers, the second is the opportunity to build a business out of the remains of the failed business, re-using some or all of it’s assets and putting to use the lessons it’s learned in the process of a) acquiring it’s customers and b) failing.

In other words, when buying a failed business there are several possible approaches you can take:

• Acquire the customer list – work to convert the customers into customers of your existing business. Assuming your existing business already offers the same products/services then that’s often a good low cost way of gaining new customers.
• Acquire the other assets – acquiring the business might give you access to cheap equipment or facilities and the opportunity to recruit good new staff that might not otherwise be available.
• Business turnaround – take a long hard look at the failed business, analyse what it does well and what it doesn’t do well then focus on turning around the business.

Those should be the only approaches taken. Sadly however I’ve come across far too many small business owners/would be entrepreneurs that take a third approach:

• Bet more and roll the dice again – they throw some more cash into the business and try again, changing little or nothing about the business, yet somehow expecting it to work this time. It rarely does.

Albert Einstein perfectly described this approach in his definition of insanity:

Insanity: doing the same thing over and over again and expecting different results. 

So if you’re thinking about, or in the process of buying a failed business please, don’t just add more money. Instead take some time to: talk to the customers, staff and suppliers; examine the books; examine the marketing collateral; review the premises; review the systems and in short properly get to know and understand the good and bad parts of the business so you’ll know exactly why it failed and what to change in order to turnaround the business.

Free updates:
If you enjoyed this post and would like to be kept updated on future posts, then please click here to get updates by Email. Alternately you can follow the updates the Business Opportunities And Ideas Facebook page or follow me on Twitter.