Buying a business during a difficult economic period presents a number of additional challenges. In addition to the hurdles experienced at any time, there is the uncertainty of the future markets and knowing which areas are likely to show growth and which are looking at more trouble on the horizon.
One area worth looking into at the moment is outsourcing. Research from Investec into the country's top 100 fastest growing privately owned mid-sized companies claimed that the 'outsourcing revolution' is in full flow. Mid-sized firms are taking on work that the public sector and larger companies are unwilling or unable to do and turning strong profits in areas as wide ranging as care homes and IT. Other fast growth areas within the technology sector include cloud computing, SaaS, data analysis, big data and mobile software.
The technology sector is performing particularly well, accounting for a significant proportion of the 100 best-performing businesses identified. Financial and professional services also come out well in the research, which found that the top 100 firms have an average turnover of £150 million in their past financial year and have achieved an average compound growth rate of 44 per cent over the past four years. Some firms reported significantly higher figures, such as Alternergy, which had a compound annual growth rate of 130 per cent.
Other trends spotted within this group of successful businesses included the tendency to operate in sector deemed to be 'safe havens' for investors, as well as a move towards more international trading. In fact, several 'hero firms' were identified as branching out from the UK market and expanding their opportunities around the world. This may not be an immediate possibility for business buyers, but it is definitely something to keep in mind as a future expansion option when making a new acquisition.
But while it is possible to spot various trends among successful companies, identifying one key to success is not so easy. The Investec study cited exceptional customer service, innovation, focus and investment among the qualities readily identified as important for growth. But it appears that the answer to growth is to look at all of these business angles collectively rather than waste time hunting for one magic formula.
Waiting for the economy to return to growth is one option for those looking to buy a business. But given the flourish of activity in niche sectors, including outsourcing, many buyers are instead opting to act now and take advantage of exciting opportunities that are continuing despite the economic climate. With the right approach, buyers can turn around the fortunes of these companies, in spite of - and in some cases as a direct result of - the current trading conditions.
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