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Distressed Businesses for Sale: What to Consider and How to Find Them

Apr 15, 2022

Distressed Businesses for Sale What to Consider and How to Find Them

With the economy still uncertain, many small and mid-sized businesses and existing franchisees are struggling, and some are even going out of business. For investors, this means that you can find some incredible deals on distressed franchises for sale.

Distressed businesses for sale can mean different things to different people. Typically they’re businesses that have problems with their finances, operations, or management. The pandemic caused many otherwise healthy businesses, to fall into this state.

Such deals are driven by the need to cash in on designated assets to provide for other urgent needs, including loan repayments and bankruptcy. Liquidation of assets is never a comfortable option for owners.

Entrepreneurs in good financial standing can get a good deal on distressed businesses such as existing franchises. If you’re looking for a distressed franchise business to buy, opportunities are available. However, it’s essential to do your homework before buying one.

Distressed Business Assets for Sale

Finding a distressed business for sale is different from buying an operating, cash-flowing business.

There are many different types of distressed businesses that you can buy, but the most common is a “turnaround” business.

Distressed business opportunities are often overlooked because most people are looking for turnkey businesses or new franchises. But buying a distressed business allows you to acquire a franchise for often pennies on the dollar. If you’re an experienced franchisee, often you’ll be able to rectify the problems of the previous owner and get the location back in the black.

You may find these types of franchise opportunities, including unique and niche businesses for sale using a simple online search query, “distressed businesses for sale near me.”

This article provides information on distressed businesses for sale and how to find and buy them:

What To Consider When Buying a Distressed Franchise

There are several things to consider when you’re looking for a distressed business to buy. You need to consider the cash flow, the property and equipment, the liabilities, and other factors. But you also need to buy a franchise that will be profitable for you. Fransmart offers a simple 10-step process for easy facilitation of your buying process.

Here are things to consider before purchasing a distressed business:

  • Take a look at the balance sheet of the company.
  • Try to understand the shortfalls of the business in inventory management and supply chains.
  • Understand the current market factors that may have led to business failure.
  • Evaluate the location of the business. Did that factor into its issues?
  • Get an understanding of how management or labour issues played a part in the business’s problem.

How To Find a Distressed Business For Sale

The number one thing you want to look for in a distressed business is a history of profitability. You want to find an opportunity that’s been growing and making money before becoming distressed. You also want to find one with solid management and leadership because good management is crucial for turning around a distressed business.

Discovering such distressed or closed businesses for sale may require effort from interested buyers. These are some actions to take when looking for a distressed business for sale:

  • Stay updated on market conditions such as rising costs, legislative changes, and licensing requirements.
  • Speak with lenders, customers, and suppliers to understand what is happening in the business.
  • Participate in industry and business-related events to gain access to insider information on available distressed businesses.
  • Talk to small business deal advisors, including lawyers and business consultants in the distressed business area.

Alternatives to Distressed Businesses

While buying a distressed business can be a good move if you find a business that has good bones, it can also be one of the riskiest ways to own a business.

If you prefer to start fresh, rather than have to turn a business around, Fransmart has a portfolio of a select amount of emerging concepts we believe are the next big thing in franchising. With any of our profitable franchise brands, you don’t have to buy a distressed business when looking to expand your business operations. Check out these new business opportunities today:

 

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