Buying a Business in Market

Developing your own ideas and building the company from the ground level isn't the only way to get started. Buying an existing business can help you reach the sky earlier. There are many disadvantages of starting a new business, including marketing of the new business, building a strong customer base, hiring motivated employees and establishing cash flow of the business. Buying an existing business is less risky than starting a new one. When you buy a business, you have an established reputation in the market, a strong customer base, reputation and experienced employees.

While the opportunity may be less risky in some aspects, you must perform persistent effort to ensure that you are fully aware of the terms of the purchase. If you have decided to buy an existing, you should take a look at these pros and cons of buying a business. You will need to know the advantages and disadvantages of buying an existing business to take the right decision.

Advantages:

•    The difficult groundwork to get the business up and running has already been done. The business should have proper plans and procedures in place.

•    One of the major advantages of buying an existing business is that you get the benefit of the established customer base and contracts.

•    The business you are going to buy will have a financial history, which gives you a clear idea of what to expect and can make it easier to attract investors and secure loans.

•    One of the important benefits you will get from buying an existing business is that the market for your product has already been established.

•    Existing employees will have their valuable experience to share.

•    It will be easier to obtain finance as the business will have a proven track record.

•    You could get the advantage of favorable credit terms from suppliers.

Disadvantages:

There are several disadvantages of buying an existing business, which should be compared against the benefits before making a big decision. Some of these are given here.

•    You have to invest a large amount up front and will also have to budget for professional fees for lawyers and accountants.

•    You have to consider why the current owner is selling up and how this might impact the business growth and your taking it over. The fact that the business is not doing well might be hidden by false statements by the owner and employees.

·         You may need working capital of several months to assist with cash flow.

•    The business might need major improvements to run smoothly.

•    The business brokers could have a black mark with certain finance providers.

•    A business that has a poor reputation amongst lenders is not going to work properly.

•    The equipment owned by the existing business may be outdated or poorly maintained.

•    It is possible that the suppliers may have bad experiences with the business in the past.