Buying an existing business, pros and cons
If you are thinking about starting a business you should also look into buying an existing business. While buying an existing business can cost a lot of money upfront you also have certain advantages that can outweigh the high cost. Here are some pros and cons to buying an existing business rather than starting a new business.
Pros:
Buying a business that is already established is a lot less of a risk than starting a new business. When buying an existing business you will have the opportunity to examine the company's cash flows, present and past, their expenses, the fluctuations during the different buying seasons, their assets, and anything else you want to examine. Also you can research the company's location if it is in a good spot or not, you can research the company's track record, you will already have an established customer base and you will be able to see what kinds of discounts the company has with its current vendors.
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You will be able to start making money right away because the business is already turning a profit. Even if you have to borrow money to purchase the business you will have the loan payment to worry about, but with an already profitable business you should be able to make that payment if not pay more than required.
You will be able to focus all of your time, energy and creative thinking into coming up with even more ways to make the business profitable.
Cons:
Buying an existing business costs more up front than starting your own businesses. You can actually start up a new business from the bottom up for almost nothing; all you need to do is work from home and fund your business as you go. The purchase price of an existing business is because somebody else has already invested into the new business to start it and wants to get something for their investment.
When you take over the business and the other owner leaves there could be some disruption in the business, especially if they were well liked. Nobody likes to see a good owner or manager leave, but you can help fix this disruption by being understanding and being a good owner as well. Listen to what your employees are telling you, especially because they might know more about the business than you do at this point.
There could be things that you don't know about that could be disadvantages to the business or that can even cause the business to lose money. Some of these things are a change in the area around the business such as a major discount chain opening up down the street, bad reputation from previous sloppy customer service, outdated equipment, etc. Numerous things can affect a business so the more research you do into buying this particular business the more information you have to base your decision on.
If you decide to go with an existing business rather than starting one on your own you should ask yourself some specific questions before you purchase the business. Here are some questions that you should ask before buying an existing business.
Do you have the right temperament and/or personality to run this kind of business?
Are you trained and experienced in this type of business or are you going to be learning as you go?
Do you have the time and energy to devote what is needed to keeping the business going?
Can you handle the bookkeeping or will you have to hire somebody to keep track of your records?
As long as you answer the questions you ask yourself honestly you should be able to make an existing business work for you.
