Pros and Cons of Buying a Distressed Business.

Good morning Buyers!

Buying a business doesn’t always mean buying perfection. In fact, some of the best deals are found in distressed businesses companies that are struggling, underperforming, or just plain neglected.

This week, we’re digging into the Pros and Cons of Buying a Distressed Business, because sometimes, with the right strategy, a failing business can become your biggest win.

“In the middle of difficulty lies opportunity.” — Albert Einstein

💡 Deal Tip of the Week: Don’t Just See What Is—See What Could Be

Distressed businesses scare away a lot of buyers. That’s exactly why they can be goldmines… if you know what to look for and how to fix it.

✅ The Pros of Buying a Distressed Business

1. Lower Purchase Price
You can often acquire these businesses at a steep discount—sometimes for asset value alone.

2. Motivated Sellers
Distressed sellers are usually eager to exit. That means faster negotiations and a higher chance of seller financing or flexible terms.

3. Built-In Infrastructure
Even struggling businesses often come with equipment, employees, customer lists, and vendor relationships—all of which cost real money to build from scratch.

4. Turnaround Potential
If the problems are operational (not structural), a new owner with the right playbook can unlock massive upside.

⚠️ The Cons (and Risks) to Watch For

1. Hidden Liabilities
Debt, lawsuits, unpaid taxes, or lease issues can come with the deal. Due diligence is everything.

2. Damaged Reputation
If the business has burned customers or employees, it may take a lot of time (and money) to rebuild trust.

3. Owner-Dependent Operations
Sometimes the owner is the business. If they're gone, the revenue might vanish too.

4. Turnaround Isn’t Instant
Buying a distressed business means work—and usually, more capital than just the purchase price. Be ready to invest time, money, and patience.

🧠 Questions to Ask Before You Buy

• Why is this business distressed—market forces or bad management?

• What will it realistically take to fix it?

• Can I acquire it without taking on too much baggage?

• Do I have the time, team, or experience to turn it around?

🗯Expert Soundbite 

“Distressed businesses aren’t for beginners. But if you know how to fix the problem—and you can buy it right—you can create massive value fast.”
— Carl Allen, Investor & Founder of Dealmaker Wealth Society

🏚️ Common Types of Distressed Deals

• Burned Out Owner – Good business, just needs fresh energy

• Zero Systems – Profitable but chaotic; fixable with operations and SOPs

• Revenue Decline – Due to poor marketing or competition, not market collapse

• Asset Rich, Cash Poor – Real estate, inventory, or equipment-heavy businesses with upside

📉 Mini Market Watch

• Rising Business Closures: According to Yelp data, business closures in certain industries (like retail and food) are ticking up again in 2025.

• Buyers Getting Creative: We're seeing more creative deal structures—like deferred payments or equity swaps—to make distressed acquisitions work.

• Niche Distress = Opportunity: Niche B2B service businesses with outdated marketing or tech are prime for revitalization.

🔜 What’s Next?

Next week: “How to Approach Owners About an Off-Market Deal”

Know someone looking at distressed businesses? Forward this to them.
Got a deal you’re unsure about? Hit reply—we’ll help you unpack it.

Until next week,

— The Practical Buyer Team 

Was this newsletter forwarded to you? Don’t miss out! Subscribe to Practical Buyer here.

_{Keep in Mind: Practical Buyer is for informational purposes only and does not constitute financial, legal, or investment advice. While we strive for accuracy, all content is provided "as is" and may not reflect the most current industry practices or regulations. Always consult with a qualified attorney, accountant, or advisor before making any business acquisition decisions.}

_{The authors and publishers are not responsible for any actions taken based on the information in this newsletter.}