Guide To Buying A Business

If you are considering buying an existing business, it's important to know the pros and cons of doing so. Here are some of the advantages:

1. Product or Service is Already Established - The product or service is already known to customers or clients, therefore the time and effort to gain customers is less.

2. Management Structure is Already in Place - This could be good or bad, but it really cuts down on the training time. It is also helpful to have the team in place that created the business you want to buy, so you can learn what got the business to where it is today and the mistakes you want to avoid going forward. This becomes even more important if the new owner does not have substantial experience in that business.

3. Existing "Goodwill" - Goodwill is the value of the business that goes beyond the hard assets that it owns. It is a measure of how the business is viewed by whom the business serves and does business with...the reputation of the business falls under goodwill.

4. Built in Collateral - One of the challenges of new businesses is that banks need a track record to consider the business for additional funding or loans. An existing business has a financial track record that can be used to secure additional funds for growth and expansion.

5. Less Start Up Time and Cost - A couple of challenges that exist for new businesses is the time and money to "get up and running". It takes time to gain a foothold in the market place and until the revenue exceeds the cost of operating the business, the owner will have to depend on his or her credit lines and working capital.

Some of the challenges or disadvantages of buying a business that is already in existence, include:

1. Bad Reputation (Goodwill) - Just like a business can have goodwill, it can also have "Bad-will". In this case, it could take a while to change the communities perception of the business and gain new or re-gain previous customers and clients.

2. Old or Outdated Equipment - There's nothing like trying to do a first rate job with second (or third) rate equipment. To compete, the business will have to update its equipment and the cost to do so can be substantial.

3. Problems of the Business - When you buy a business, you are taking the good with the bad. Any problems the business owner had (customer issues, lawsuits, etc. ) may transfer with the business.

4. Office Culture May Be Hard to Change - Every office has its own culture on how people interact with one another and how things are done. Some owners or managers may have a relaxed attitude about things while others may be more hard-driving. If the new owners attitudes and beliefs are different from the past culture, the change can be difficult to manage and/or handle on both ends.

Whatever the outcome, by doing your homework ahead of time anf fully understanding the business you are considering, you can make a more informed decision on the pros and cons and determine whether the business is one to buy or better left alone.

Good Luck and Happy Hunting!