Your friendly guide to smart acquisitions – inspired by real-life lessons and Indian success stories
Buying a business can feel like stepping into someone else’s shoes — exciting, but slightly uncomfortable at first. You inherit not just the assets and profits, but also the baggage, the brand, and the dreams of someone else’s journey.
So how do you know it’s the right fit?
Let’s break it down, step by step — with real stories, simple language, and practical advice.
It All Started Over Chai…
A few years ago, I met Ritesh (name changed), a software engineer from Pune who was burnt out in his corporate job. Instead of starting from scratch, he bought a small but profitable cloud kitchen brand from a friend. Today, it’s grown into a multi-city operation.
But before Ritesh made that leap, he spent 6 months understanding every part of the business — from supplier relationships to Swiggy reviews.
That’s what smart acquisition looks like.
What Should You Consider Before Buying a Business?
Here’s your ultimate pre-purchase checklist:
1. Do Your Due Diligence (Don’t Skip This!)
Think of this as a background check — for the business. You want to know:
- Who really owns what?
- Are there any pending legal or tax issues?
- Is the team motivated, or planning to leave?
Pro tip: Hire a lawyer or accountant for this stage. Yes, it’s an extra cost. But it could save you lakhs (or crores) later.
2. Assess the Financial Health
You don’t want a sinking ship.
Here’s what to ask for:
- Profit & Loss Statements (3–5 years)
- Balance Sheets
- Tax Returns
- Cash Flow Statements
- Debts or liabilities
Quick tip: Look for consistent revenue, healthy margins, and low debt. Also, watch for any financial “spikes” that seem unnatural — a sudden jump in profits just before the sale is a red flag.
3. Understand the Market & Competition
Even a profitable business can fail if the market is shrinking or overly saturated.
Ask yourself:
- Is this a growing industry in India?
- What are consumer trends?
- Who are the top competitors?
- What makes this business different?
Example: When boAt entered the audio tech space, they studied global trends but built a brand for Indian youth — affordable, stylish, and durable. That positioning was key.
4. Evaluate the Business Model
Is this a one-hit wonder or a repeatable model?
Check:
- Customer acquisition cost vs. lifetime value
- Revenue streams — are they diversified?
- Dependency on one supplier or customer?
- Is the model scalable?
If it’s a franchise, examine the parent company’s support system, brand power, and royalty structure.
5. Legal and Compliance Matters
Don’t ignore the paperwork!
Ensure:
- All registrations (GST, FSSAI, ROC, trademarks) are in place.
- There are no pending lawsuits or regulatory red flags.
- Employment contracts are transferable.
Real Story: A friend bought a successful gym chain in Mumbai but later realized the brand name wasn’t trademarked. A similar-sounding competitor popped up across the street. A legal nightmare ensued.
6. Identify Key Risks
- Customer churn rate
- Seasonal dependency
- Key staff quitting post-sale
- High fixed costs
- Obsolete technology or inventory
Always ask: What could go wrong here?
7. Valuing the Business (Don’t Overpay!)
Valuation isn’t just about numbers. It’s part art, part science.
Common methods:
- Earnings Multiple (EBITDA x Industry Multiple)
- Asset-Based Valuation
- Discounted Cash Flow (DCF)
- Use all three and look for consistency.
And remember: You don’t pay for potential, you pay for performance. Future growth is your job — not theirs to charge for.
8. Build the Right Advisory Team
Buying a business in India? Then you need:
- A Chartered Accountant for financial and tax reviews
- A Lawyer for contracts, compliance, and due diligence
- Optionally, a business consultant for market insight and post-acquisition strategy
These are your sherpas. Trust them.
9. Align the Business With Your Personal Goals
You’re not just buying a business. You’re buying a lifestyle.
Ask yourself:
- Will I enjoy running this day-to-day?
- Does this business align with my values?
- Is it location-bound or remote?
- Can I grow it in a way that fits my ambition?
Reflection: A friend bought a café but hated waking up at 6 AM. It lasted 3 months.
10. Negotiating the Purchase (Like a Pro)
Negotiation is not about winning — it’s about protecting your future.
Tips:
- Start lower than your final offer
- Ask for a transition period where the old owner stays on
- Insist on non-compete clauses
- Include performance-based payouts (earn-outs) if valuation is aggressive
Bonus: Post-Acquisition Integration
Buying the business is just the start.
You’ll need:
- A 90-day transition plan
- Clear communication with staff and customers
- Quick wins to show momentum
- A roadmap for automation, marketing, and growth
Case Study: Zerodha acquired small fintech startups and integrated them slowly, keeping core teams intact and culture preserved.
Common Pitfalls to Avoid
- Skipping legal checks
- Buying a “cheap” business without understanding why it’s cheap
- Underestimating working capital needs
- Not involving professionals
- Falling for emotional sales pitches
Resources for Further Reading
- The Intelligent Investor by Benjamin Graham (on valuation mindset)
- IndiaFilings Blog – for legal & compliance tips
- "HBR Guide to Buying a Small Business"
- Local CA or Startup Consultants for personalized support
Final Thought
Buying a business in India isn’t just about money. It’s about vision, patience, and picking a story you want to continue writing.
You’re not just acquiring an asset. You’re acquiring relationships, systems, goodwill — and sometimes, a dream someone else started.
So ask yourself — does this story feel like one you want to be a part of?
If this helped, feel free to share or comment with your own experience.
Thinking of buying a business? Drop your questions — happy to answer what I can!