Buying an Existing Business? Advantages and Tips to Consider Before Making Your Purchase
If you are interested in running a business but do not want to go through the process of developing an idea and getting it off the ground, you might consider buying an existing business. Below are a few of the many benefits of buying an existing business along with a couple tips that potential buyers should keep in mind before making a purchase.
Advantages of Buying an Existing Business
Skip the startup work: Getting set up is the hardest part of running a business. Before they can start selling goods or services, new business owners need to spend a great deal of time and money on equipment, paperwork, and permits. After they take care of these basics, new business owners often work 60-80 hours a week, seven days a week in the first year or two of starting their business. A longer time may pass before new business owners see a profit.
When you buy an existing business, you avoid these costs and can instead get right to work on improving and growing the business. Buying a business also means obtaining a knowledgeable staff, which saves you the time and money of finding and training new employees yourself.
Avoid taking a risk: Starting a business from scratch can be quite a risky venture. Consider that “40% of new businesses fail in the first year, and 80% fail within five years.”
When you buy a successful business, you are paying for a proven concept and an existing customer base, which saves you from having to generate initial interest in the business. This translates into a significantly lower risk than starting your own business. Rather than relying on speculation, projection, and estimates, you can make an informed choice based on the business’s sales and profit records. Even if a business’s record is lacking in some areas, you will ideally know whether or not you can improve the business with your unique skills, experience, and expertise.
Get great financing: While buying an existing business can sometimes appear costlier than starting a new one, you are actually more likely to receive better loans from lending institutions when buying an existing business. When banks are able to see the historical earnings of an established business, they are more likely to help fund your transaction.
Tips for Buying an Established Business
Find the right fit: Since you are taking on someone else’s established concept rather than implementing your own new idea, it’s important to locate an already existing business that is the right match for you. You can begin by considering your own talent, strengths, interests, and experience, along with the time you are willing to put into a business. In addition to identifying a business suitable to you in these key areas, you will also need to find one that is located in a geographical location agreeable to your personal desires and situation.
Don’t inherit existing liabilities: Business owners decide to sell their businesses for a number of reasons; for example, many sellers have simply reached personal goals or they are looking to retire. While business owners who sell through an established business broker will not conceal serious problems or liabilities related to their business, you will still need to perform due diligence in order to avoid any future problems. During the due diligence stage of buying an existing business, you will obtain documents from the seller to verify the business’s profitability and worth and guard against any potential liabilities.
Working with an established business advisor will ensure that you are put in contact with a credible business perfectly suited to your criteria. If you are interested in buying an existing business, contact Transworld.