Start a Company or Buy an existing Business?
Many people find the process of starting a company scary, boring, or risky and they therefore turn to an already established business. That way they will not have to deal with economists, business consultants, lawyers and local authorities. Buying an existing business takes away the hustle of business plans, financial figures, and it saves a lot of time and effort. Generally speaking, this may be a safer alternative especially if someone else has already done everything that you should start doing and the business has a track record.

Below we discuss some of the advantages and disadvantages of buying an existing business:

Advantages:

  • The main reason why would someone want to buy an existing business is the reduction of costs, time and effort. 

  • Also, the buyer of the business may have an audit run in the business and if it is in profit, it reduces the business risk. If on the other hand the company is losing money then the buyer will know to refrain from similar activities on that market. 
  • Cash flow may start immediately upon the purchase of the business since it might have a good track record and the buyer will not have to wait until the business turns in profit. 

  • In an existing business most likely there will be pre-existing customers and instead of putting huge effort to attract customers/clients to the business  the buyer would simply want to expand the business or the activities, which is a much easier task. 

  • An existing business will also have easier financing available, if needed.


 Disadvantages:

  • The main disadvantage of buying an existing business is the actual purchase cost. The more successful the business, the higher the cost to buy it. Eventually the new buyer will have to pay for the success of the business, for finding customers, advertising costs, business plans, and all costs that he would pay if he had started the company from scratch, plus the efforts of the current owners and of course the potential of the business. 

  •  Because the new buyer has not put any effort to set up the business, instead he is buying it ready, he does not know the difficulties of the particular market,  or problems of the inside of the company, or the things to avoid. 



Disclaimer:
All the information displayed on this website is not considered legal advice. Such information is solely for education purposes to the public and individuals should not try to resolve any problems relying on this information. Readers are cautioned not to attempt to solve individual problems on the basis of the information contained herein and are strongly advised to seek professional advice from an expert.