Top tips for buying and reviving a failing business

Sylvia Pennington

This month saw the re-opening of the Dick Smith online store, four months after the iconic chain collapsed into receivership.

Acquired by internet retail czar Ruslan Kogan for an undisclosed sum, dicksmith.com.au has a new trading platform and offers more than 5000 electrical and computer products.

Kogan has been bullish about its plans to breathe new life into the brand, courtesy of slick service, speedy shipping and keen prices.

Sydney entrepreneur Rebecca Slack embarked on a similar turnaround mission a year ago when she took over CleverStuff, a struggling online educational toy store.

Twelve months on, Slack says the business is in better shape, following an injection of passion, effort and love.

Here are her tips for buying and reviving an ailing enterprise.

"Be true to yourself and make the business what you want it to be."

Make it your own

Acquire a business and you can expect to be bombarded with information about how things are done around here. All good, but how it rolls from hereon in, is actually your call.

“It was tough for me during the handover because I was constantly told, ‘I wouldn’t do that’ or ‘I don’t know if that suits the CleverStuff customer or ethos’ but the company was mine and I could do what I wanted – that took a while to learn,” Slack says.

“It’s important to respect the old owners but be true to yourself and make the business what you want it to be.”

Learn from their mistakes…

You’ve bought an enterprise on the brink of collapse – and it was failing for a reason. But if you make a conscious decision to learn from your predecessor’s mistakes, you’ll be less likely to repeat them.

“Use the change to give it a shake up,” Slack says. “That might mean rebranding, redesigning your web site, fixing any processes that were failing…We changed our web site platform, accounting system and inventory management system. That resulted in less admin work and a saving on the wages bill.”

And their successes

While the former business owners may have made some wrong calls, chances are they were doing some things right too. Work out what these were and keep doing them.

“Sending out email newsletters, providing business accounts and offering a quick delivery service seemed to result in a spike in sales so we maintained those,” Slack says.

“Look at their history – you bought the business because you saw potential there beneath the problems, so remember those promising signs and focus on developing them.”

"Be persistent and patient while you do the needful."

The journey back to profit

It takes time for an enterprise to go bad – and it’s rare for one to be turned around overnight. Be persistent and patient while you do the needful.

“We think of our business as a teenager,” Slack says. “When we bought it, it was in old age, a bit tired, and had been doing the same thing for years. We took it back practically to start up phase and decided what we wanted our adult store to look like. At the moment we’re at a teenage stage – it’s getting more independent, but we wouldn’t leave it alone for a month!”

Sylvia Pennington

Sylvia Pennington is a Brisbane-based freelance journalist who writes about small business, information technology and personal finance.

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