Back in 2011, Charles Coristine was at the height of his career in finance, working with major markets across the globe. But after nearly two decades in the fast-paced world of Wall Street, burnout was inevitable. Despite trying various strategies to manage the stress,such as a vegetarian diet, meditation, and enrolling in an MBA program, nothing seemed to ease the exhaustion.
It was at a barbecue when a conversation sparked a new direction. Coristine spoke with the owner of LesserEvil, a struggling snack company that specialized in healthier alternatives. The business was faltering, and the owner was eager to sell. Coristine, with no experience in the food industry, found himself intrigued by the idea of taking on a new challenge and saw potential in the company’s focus on mindful, health-conscious snacks.
By November of that year, he purchased LesserEvil for $250,000 from his savings, with an additional $100,000 to be paid later. It was a leap of faith. The business was bringing in less than $1 million annually and was losing money. But today, LesserEvil has grown under Coristine's leadership, reaching $103 million in gross sales by 2023, with $82.9 million in net sales.
A Bold Reinvention
At the time of the acquisition, Coristine was still employed at TD Bank and completing his MBA. In 2012, with his degree in hand, he took on his new role full-time as CEO of LesserEvil. His first steps included assembling a team that shared his vision for the company. He brought in his graduate school friend, Andrew Strife, as COO and CFO, and even hired his wakeboarding instructor to head up marketing.
The company needed a revamp. Its branding was outdated and didn’t resonate with modern consumers. Worse, the company was spending nearly 20% of its revenue on co-packers who helped produce and ship the snacks. Operating out of a small office in Wilton, Connecticut, the team worked tirelessly to update LesserEvil’s look and start their own production line.
Coristine’s personal finances were stretched thin. To keep things moving, the team raised funds from friends and family and secured additional financing from a connection Coristine had at a local bank. They then moved into a modest 5,000-square-foot factory in Danbury, filling it with used equipment they had sourced from auctions.
Their resourcefulness extended beyond the equipment. They enlisted the help of nearby welders to modify machines, adding wheels and popcorn shoots to keep the production line running smoothly. When they painted the factory black and added the company’s logo to the building, it even drew curious passersby.
New Direction with a Key Ingredient
In 2014, the company expanded its space by knocking down a wall to incorporate an additional 2,000 square feet, giving them the room to add a new production line. Around that time, Coristine’s personal nutritionist suggested using coconut oil to pop the popcorn. Though initially skeptical about its shelf life, he decided to test it, leaving a sample on top of a refrigerator for three months.
Surprisingly, the oil remained fresh, and the flavor was excellent. LesserEvil introduced the reformulated product under the name Buddha Bowl, featuring a laughing Buddha logo, and it quickly became a hit. By the end of the year, Buddha Bowl brought in about $2 million in revenue, contributing to a third of the company’s annual earnings.
This marked a turning point. Kroger, the first major retailer to partner with the brand, began stocking its products in 2015. This partnership, combined with the company’s growth, enabled another major move in 2017, to a 20,000-square-foot factory. A year later, LesserEvil secured $3 million in funding from a sustainable food investment firm, allowing them to add new production lines and refresh the brand’s packaging. Each product now featured its own unique “guru,” such as historical figures like Homer and Thoreau.
The rebranding efforts paid off. With fresh products and a distinct identity, LesserEvil entered a profitable period. Coristine finally began drawing a salary from the company, marking a milestone in its financial health.
Balancing Growth with Innovation
From the start, Coristine was committed to setting LesserEvil apart from its competition by using unique ingredients like extra-virgin coconut oil and avocado oil. This dedication to innovation has come with some challenges. In June, a report found concerning levels of lead in two of LesserEvil’s snacks for kids. The company immediately issued an apology and took steps to reformulate the products, which will be re-released later this year without the ingredient that caused the issue.
Despite these setbacks, LesserEvil has continued to thrive. In the first half of 2024, the company reached $62 million in net sales. With a recent $19 million investment, they purchased new equipment, bought out previous investors, and expanded into a second factory located near their original facility in Danbury. Today, between its two factories, LesserEvil pops an impressive 5,000 pounds of popcorn per hour.
LesserEvil now employs 280 people, and the company continues to expand its product lines. Coristine’s immediate goal is to keep the momentum going while staying true to the brand’s mission. In the long run, his vision is to build a company that stands the test of time.
On a personal level, the transition away from Wall Street has been transformative. Coristine enjoys a better work-life balance, working reasonable hours and finding greater fulfillment in his role. What started as a risky, poorly researched decision has blossomed into a thriving business, and for Coristine, that’s what success looks like.
Why Buy a Failing Business?
Before diving into the practicalities of turning a failing business around, it's important to understand why one would consider buying a business that's struggling in the first place. On the surface, it seems counterintuitive. Why not just start a new business or buy an already profitable one?
- Cost-Effectiveness: One of the biggest advantages is the lower upfront cost. Failing businesses are often sold at significant discounts compared to their profitable counterparts. If you can identify the underlying problems and have a plan to fix them, you may acquire valuable assets, such as prime locations, customer bases, or intellectual property, at a fraction of the cost.
- Potential for Growth: Many businesses fail due to poor management or outdated practices rather than a lack of market potential. With fresh ideas, effective management, and the right strategies, there’s a real opportunity to tap into existing demand and grow the business quickly.
- Established Infrastructure: A failing business typically comes with an established infrastructure. This could include equipment, a customer base, and employees familiar with day-to-day operations. These factors can help you avoid the high start-up costs associated with creating a business from scratch.
- Turnaround Success Stories: Some of the most successful businesses today began as failing enterprises. Entrepreneurs who have been able to turn these businesses around often report great financial rewards, provided they approached the process with clear objectives and strategies.
Where to Start When Buying a Failing Business
Buying a failing business requires a different approach than starting a new one. You’re not just acquiring assets; you’re also inheriting the problems that caused the business to fail in the first place. Here’s how experienced entrepreneurs recommend approaching the process.
1. Conduct Thorough Due Diligence
Before anything else, conduct an exhaustive evaluation of the business. Financials, customer data, vendor relationships, and the current management team should all be carefully analyzed. As one commentator mentioned in a discussion on business turnarounds, evaluating a failing business should be done on strict and real terms. The financials need to make sense, or the purchase will be doomed from the start.
Start with these key questions:
- What led to the business’s current state?
- Is there a clear path to profitability?
- Are there any liabilities, such as debt or legal issues, that could present obstacles?
- How is the business perceived by its customers, and can that perception be improved?
Thorough due diligence will give you a clearer picture of the potential risks and rewards of taking over the business.
2. Look for Underlying Problems, Not Symptoms
Often, what appears to be the problem on the surface is just a symptom of deeper, underlying issues. It’s easy to blame slow sales, for example, but the true issue might be an inefficient operational system, poor marketing, or a lack of differentiation in the market.
According to experienced business turnaround experts, it’s crucial to identify these root problems and address them head-on. One user in a business forum shared that when evaluating businesses in need of help, the key question was whether the entrepreneur could clearly identify areas for improvement, such as operational efficiency or management issues, and then develop actionable strategies to address them.
3. Focus on Cash Flow and Profitability
Profitability is key. Businesses fail because they aren’t making money, so your number one goal should be to focus on generating positive cash flow. One entrepreneur shared their insight: “Can you analyze the business and say, ‘well, x, y, z, and a-e all can obviously be improved upon’ and then prove the financials behind that?”
It’s crucial to ask yourself these types of questions and ensure that your strategy for the business will focus on improving cash flow and profitability, whether through cost-cutting, increasing sales, or a combination of both.
4. Understand the Industry and Market Dynamics
You don’t necessarily need years of experience in the industry of the business you’re buying, but you do need to understand the market dynamics at play. A seafood restaurant that’s struggling because of poor customer service might be salvageable, but a seafood restaurant in a market where demand is shrinking could be a more challenging proposition.
If you're venturing into an industry that’s new to you, make sure to immerse yourself in the market. Understand what customers want, where the business is failing to deliver, and what you can do to meet those demands.
Turning the Business Around
Once you've purchased the failing business, the real work begins. Turning around a failing business requires a hands-on approach, a clear plan, and the ability to adapt when things don’t go as planned.
1. Revamp the Business Model
The business model that was in place before clearly wasn’t working. Now that you’re in charge, it’s time to evaluate whether you need a complete overhaul or if a few strategic tweaks will be enough.
One entrepreneur shared their story of transforming a failing business by focusing on improving operational efficiency. By hiring the right team and making small but significant changes to the production line, they were able to cut costs and deliver better quality products to customers, leading to a more profitable enterprise.
If the business had been underperforming because it failed to adapt to current trends, take a close look at how you can modernize the company’s offerings. Sometimes, this could mean a complete rebranding or repositioning in the market.
2. Improve Management and Staff
Sometimes, the business is failing due to poor management or a lack of engagement from staff. When you take over, it’s essential to assess the team in place. Are the right people in the right positions? Do they need additional training, or are new hires necessary?
One common theme shared by successful business turnarounds is the importance of hiring talented managers who can help guide the company through difficult times. Whether you promote from within or bring in outsiders, building a strong team is critical to the long-term success of the business.
3. Focus on Marketing and Customer Perception
The way customers perceive the business can make or break it. As you turn around a failing business, consider how you can improve the company’s public image. Maybe the brand has become outdated or has lost relevance in the eyes of customers. A fresh marketing campaign, rebranding, or even improving customer service can work wonders.
One entrepreneur shared how they turned around a struggling retail business by enhancing the customer experience. They invested in better training for customer service staff, improved the store’s layout, and engaged with customers on social media, transforming the company’s reputation and increasing foot traffic.
4. Cut Costs Where Possible
If the business is hemorrhaging money, cutting costs will likely be a top priority. However, cost-cutting doesn’t always mean laying off staff or slashing quality. There are usually operational inefficiencies that can be streamlined, such as renegotiating vendor contracts, reducing waste, or finding more efficient production methods.
For example, one business owner bought used equipment at auction to lower startup costs when they took over a failing business. Others have found success by outsourcing certain functions or automating manual processes to save on labor costs.
Common Mistakes and Lessons Learned
As with any business venture, buying and turning around a failing business comes with its fair share of challenges. Entrepreneurs who have been through the process have shared some valuable lessons:
- Avoid Taking on Too Much Debt: Some businesses fail because of overwhelming debt. While financing may be necessary to get things off the ground, be cautious about taking on too much. High debt loads can limit your flexibility and slow down the turnaround process.
- Don't Overestimate Your Abilities: It’s easy to assume that with hard work and dedication, any business can be fixed. But as one entrepreneur shared, sometimes the problems are more deeply rooted than they appear. Be realistic about what you can accomplish and don’t hesitate to seek expert advice or guidance when needed.
- Focus on What You Do Best: One of the most important lessons from those who have successfully turned around businesses is to stick to your strengths. If you’re an expert in operations, focus on improving the efficiency of the business. If marketing is your strength, concentrate on rebuilding the brand. Trying to do everything yourself or making decisions outside your area of expertise can lead to costly mistakes.
- Adapt and Evolve: Sometimes, the strategies you initially planned to use won’t work as expected. The market might change, or internal dynamics could shift. The ability to adapt and evolve your approach is key to long-term success.
Final Thoughts
Buying and turning around a failing business can be a daunting task, but with careful planning, an eye for opportunity, and the right team in place, it’s possible to transform a struggling company into a thriving one. Start with thorough due diligence, identify the root causes of failure, and craft a clear strategy for turning the business around. Whether you're cutting costs, improving operations, or rebranding, always keep profitability and growth at the forefront of your efforts.
For those with the knowledge, resources, and determination, the rewards of reviving a failing business can be substantial, both financially and personally. While the road ahead may be challenging, the opportunity for success makes the effort worthwhile.
Ready to take the next step? Visit Openfair's website to discover a wide range of profitable and failing businesses for sale, with prices starting as low as $10,000. Whether you're looking for your next big project or an established venture to grow, you'll find opportunities that match your needs and ambitions.
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