An advantage that mature businesses will typically have is that longevity has provided them with a degree of stability and a performance history. At the same time growth can slow as market capacity is reached. This can make acquisition an important aspect of a growth strategy.
To help make the acquisition strategy a reality start with your business plan as it will help identify the appropriate investment and borrowing strategies that can be tapped when opportunities arise. If you have a team of advisors, you should also leverage their experience in order to help form your strategy.
When developing your business plan, you need to estimate the potential costs associated with an acquisition (purchase costs, legal costs, loss of income during rebranding, possible financing costs, and the list goes on).
Things you need to consider to help develop the appropriate investment solutions include:
• The time horizon of your planned acquisition. When do you expect to execute your purchase? How much cash can you dedicate to your acquisition fund? Are you able to regularly top-up the fund?
• You should clearly understand the objective of your investment. Where and when you wish to acquire: to expand in your home market or across a larger geography.
• You also have to consider risk tolerance. A riskier or longer-term investment may produce a higher yield, while shorter-term vehicles are generally more secure but have a lower return.
After reflecting on these factors, you and your Scotiabank Small Business advisor will be able to determine the appropriate combination of investment instruments to help your achieve your goals.
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