Pro’s and Con’s of Buying An Existing Business

Going into business for yourself is an exciting idea that requires careful consideration. Depending on what you are looking for in a business, there is the option to start your business from scratch, or to buy a business that is already established. Both of these options have pros and cons so they should be weighed carefully before any commitment down either path is made.

The Pros of Buying an Existing Business

The brand or service has been marketplace tested

This is a huge advantage of buying an existing business over starting your own from scratch. The success of the product or service that the business offers has already been tested. This eliminates much of the risk associated with a brand new business.

A business comes with an established customer base

Finding loyal customers is paramount to the success of any business, so purchasing a business with an already established customer base ensures the toughest part is already done for you. Now you can focus on growing that customer base.

Existing staff are already trained and knowledgeable

The process of finding, hiring, and training employees that fit into the business takes time. When you purchase a business, you are also acquiring an already trained staff, and that saves a lot of time.

Policies, procedures and practices are already established

Developing policies and procedures for your business can take time and involve a little trial and error in the beginning. When you buy a business, there are already policies and procedures that have been tested with time. You can simply tweak anything that you feel needs to be changed or improved.

It’s usually easier to finance a business purchase than a start-up

For lenders, it’s less risky to provide financing for a business that already has a successful track record than for a start-up where the future is a bit more shaky.

Can begin working immediately on growth and improvement

With so many important aspects of the business already established for you, you don’t have to spend so much time building the foundation. You can jump right into growing the business and improving any areas that may need it.

Start turning a profit sooner than with a start-up

One of the biggest benefits of all of purchasing a business is the amount of time in which you’ll turn a profit. Because you don’t have to spend so much time building everything, you’ll most likely see sales in your first month. Most start-ups take up to several years to start seeing sales in the range that they need to be in to be profitable.

The Cons of Buying an Existing Business

Higher initial cost

Unless you are using some of our creative finance strategies the cost to purchase a business is almost always higher than the initial costs if you were to start the same business from scratch. There are many fees associated with the sale of a business so keep that in mind when deciding to buy over starting your business.

Possible staff problems

While it’s usually beneficial to receive a full, well-trained staff with a business purchase, sometimes existing staff members can be disgruntled about a new boss or changes. Try to meet the staff when weighing the pros and cons of acquiring an established staff to get a feel for their loyalties. Many employees are loyal to the business owner because of years of working together.

Fixing problems with an established business

If the business you intend to buy was simply getting by on the bare minimum, you might be in for a lot of work to repair the existing brand. Look at the business’ sales history to see if this is the case. It can be incredibly difficult to resurrect a business that is already on the path to failure. With a start-up, you’ll have a clean slate and won’t have to worry about this problem.

Getting stuck with existing policies

If you have a very clear vision of your policies and procedures, you can run into some stumbling blocks with an existing business. Changing policies and procedures can be tough when employees and customers are accustomed to doing it their way.

Making it your own

Probably the biggest downside to purchasing a business is the difficulty and time it can take to turn it into your own dream business. You may be compromising on a lot of aspects of how you imagined your business when you decide to buy rather than start your own.

Carl is the Author of Red Means Go! and founder of Business Builders Academy. He invests in and runs a number of businesses, and regularly teaches business skills through online training and live speaking events.

About The Author

Carl Taylor

Carl is the Author of Red Means Go! and founder of Business Builders Academy. He invests in and runs a number of businesses, and regularly teaches business skills through online training and live speaking events.