The idea of buying a distressed business can sound exciting.
You swoop in, fix what’s broken, and flip it for a massive profit.
But in reality, it's one of the hardest plays in acquisitions.
Today, I’ll break down whether this strategy makes sense for you.
Why some buyers chase distressed deals
The appeal is obvious:
You can buy these businesses at a steep discount (sometimes 50-70% below market value).
Sellers are often desperate, which means creative financing options.
You might put down only 10-30% with the seller financing the rest because they need someone to take it off their hands.
If you pull off the turnaround, the returns can be incredible.
But here’s what most people don't realize
Turning around a struggling business is brutally difficult.
This requires you to be a motivational speaker to rally a demoralized team, a systems expert to fix broken operations, and a finance wizard to manage cash flow while bleeding money.
You’ll make tough calls about firing underperformers and hiring new talent, and if the business is losing money, you’ll need deep pockets to keep it afloat during the turnaround.
And forget about work-life balance.
This is an all-hands-on-deck situation that will consume your life for months or even years.
Is this for you?
Ask yourself honestly: do you have the experience to reverse a business in decline?
If not, you’ll need to partner with someone who does, and honestly…
I’d suggest building a team of advisors, industry experts, and experienced operators before you even make an offer.
Next, dig deep into why the business is struggling.
Is it fixable problems like outdated systems or poor marketing? Or fundamental issues like a dying market or location?
Be brutally honest with yourself about whether you can actually fix it.
Finally, make sure you have enough cash reserves to fund the turnaround, so you don’t run out of money halfway through.
My take on distressed businesses
This strategy isn’t for first-time buyers.
It’s intense, risky, and requires specific skills most people don’t have.
If you’re looking for a more straightforward path to business ownership, focus on acquiring stable, profitable businesses that have been operating successfully for 5+ years.
The returns might be less dramatic, but your odds of success are exponentially higher.
If you're interested in stable, profitable businesses instead…
I share opportunities with subscribers when I come across deals worth evaluating.
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Onward,
— Ben Kelly
