Why Buy and Build

Buy and Build Strategy

West Midlands Business Advisors

One way of improving your business value and increasing your return on investment is to buy another similar business.


  • Improves your profitability, your knowledge, synergistic savings will reduce overhead and running costs
  • Improve your business value. A larger business will normally be sold at a larger profit multiple

For example:

A business owner runs a business with a turnover of £1milliion and makes a profit of £100,000.

He then buys a similar business which has a turnover of £1 million and makes a profit of £100,000. (He pays £200,000 for this business – 2 x multiple of profit).

By using his knowledge he identifies opportunities of reducing the combined overheads, thus increasing profitability by £30,000.

A new larger company has a turnover of £2 million and achieves a profit of £230,000 (15% improvement).

If he was to sell this larger business, he may well be able to achieve a higher multiple, let’s say 2.5

The value of their business is now £230,000 x 2.5 = £575,000 (a 43% improvement – £575,000 compared to two businesses selling for £100,000 profit x multiple of 2 x 2 businesses = £400,000).


  • Use your knowledge to increase profitability 
  • Remove duplication to reduce overheads.
  • Increased profitability x increased larger company multiplier = significant growth of your asset

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