By: First Union
The Pros and Cons of Buying an Existing Business
Given how many people are retiring and looking to sell their businesses and consequently, how many younger professionals want to take that entrepreneurial leap, the number of businesses bought and sold in the US has grown significantly in the past few years. Why buy an existing business versus starting from scratch? It does give you a foundation from which to get started. You avoid some of those brand new business headaches, not to mention, you miss out on the inevitable growing pains. That said, there are some challenges when it comes to purchasing an existing company. So we thought we'd break down some of the pros and cons.
A Few of the Pros
- There is already a cash flow. Yes, you may have to put out a fair amount of money to acquire the business, but keep in mind, you are getting a company most likely that has a steady stream of revenue coming in.
- You also have an established customer base. Attracting and maintaining a clientele takes time—for new businesses this could be a significant amount of time. By buying an existing business, you already have built-in customers.
- There are employees are familiar with the process. If you do buy a company, odds are you're going to want to keep those experienced employees on board. You can learn quite a bit from them regarding the nuts and bolts of the company's processes and operations.
Some Cons to Consider
- There is that larger upfront cost. Whomever you're buying the company from has put a great deal of hard work, time and energy into establishing their brand. This, of course, comes with a price tag—usually, this can be a substantial price tag.
- There are going to be some associated risks. This is true of any business—new or existing. That's why it is so key to stay on top of things and do your homework first.
- There will be a learning curve. You're going to need time to familiarize yourself with everything, to engage with existing employees and understand how the system works.