Why Buy an Existing Business?

Why Buy an Existing Business? Probably the easiest way to get rolling in your own business is to buy someone else's business.

Advantages of buying an Existing Business

Buying an existing, profitable business can have many advantages, such as:
  • You'll immediately have a developed product (or service)
  • You know the market exists and is viable
  • The business already has an established presence
  • The business has a developed customer base
  • If there are employees, they are already trained and (assumed) productive
  • It can cost much less to buy an existing business than to start a new one
  • It is much easier to change existing registrations required by federal, state and local governments than to apply for new ones
Disadvantages of buying an Existing Business

Buying an existing business can have disadvantages, such as:
  • The previous owner may be responsible for bad will among many customers
  • The existing product(s) may be obsolete
  • New competition has moved in which contributes to the owners desire to sell
  • There are union problems which may be too expensive to resolve
  • The business has too many liabilities and/or uncollected receivables
Locating an Available Business

There are many ways to locate an available business for purchase:
  • Ads in local newspapers or the Wall Street Journal
  • Business brokers and real estate agents
  • Your attorney, accountant, friends, etc.
  • Direct contact with business owners whom you may interest in selling
  • Business for sale websites
Cautions in Buying an Existing Business

Firstly, when buying an existing business, heed the old caution, "Buyer Beware".

Secondly, I strongly urge you to retain an attorney experienced in business acquisitions. You may also need an accountant but your attorney will know if that is necessary. Depending on the size and complexity of the bookkeeping, the need for a full and careful audit may be indicated.

Interviews of existing employees may also be recommended. While some may be sufficiently loyal to the current owner, most will be more concerned with their continuing of employment. In any case, interviews should be in private.

I also recommend talks with customers, especially those with overdue accounts. Remember that it appears to be 'human nature' to express dissatisfaction more readily than satisfaction.

Finally, if a business is currently losing money, this does not mean that you should necessarily avoid it. You may have talents, abilities and experience the current owner lacks and can turn the business around. This is frequently the hope of new business owners who display 'Under New Management' signs on their newly acquired businesses. You really need to look at the fiscal trend over a few years as well as the numbers of customers buying from the business. There are many situations that can make a good business go sour. In any case, you should really have the advice of professionals.

About the Author
Zzyvko Marjanovitch ('Dr. Z') and the Activizers Group of Wheatley Memorial Institute of Information Sciences (http://www.activizers.com) have specialized in the conception and implementation of small, family-owned businesses and computer-oriented marketing since the Sixties. Their efforts have spanned from medical and personal service, through small catalog order enterprises to small 'brick and mortar' retail stores. They have designed and conducted hundreds of marketing studies and conducted many seminars on these subjects.