Commercial Businesses

Buying an Existing Business

If you think that starting your own business is too difficult or costly, you could consider buying an existing business. The main advantage of buying an existing business is that you are dealing with a known entity. You are purchasing stock, equipment, a location and more importantly, customers and reputation.

However, this has advantages and disadvantages.

Some of the advantages are:

  • Immediate business: Operations can start immediately.
  • Quick cash flow: Sales of existing stock and collection of receivables can produce quick cash flow.
  • Existing customers: Customers and suppliers are already in there.
  • Existing goodwill: If you buy the goodwill as well, you already have customers and suppliers.
  • Eliminate competition: Buy the competitor

Some of the disadvantages of buying an existing business are:

  • Cost: Buying an existing business can be more costly than starting your own business.
  • Problems: You may also be buying the inherent problems in the business.
  • Obsolete goods: Some of the goods may be obsolete.
  • Personality conflicts: Your personality may clash with existing staff.
  • Bad debts: You may be buying bills owed to the business (receivables) that will never be collected.

The steps involved in purchasing a business are similar to those you need to take whenever you make any major purchase, such as:

  • Locate a good business to buy: Try the Internet, newspapers, Real estate Agents or even approach a current owner.
  • Research the business thoroughly: Obtain the assistance of a Real Estate Agent, Lawyer, and Accountant.
  • Decide whether to buy: Use your head as well as your heart. Discuss the purchase with others.

Use the Complete Business Checklist to get an overview of running a business - from deciding to become self employed through to the documentation required to sell your business.

The next step is to make a