Preface: “It’s fine to celebrate success but it is more important to heed the lessons of failure.”- Bill Gates
Weighing the Pros and Cons of Purchasing an Existing Business
Credit: Jim McKinley
Entrepreneurship can be a challenging journey, but buying an existing business can be a shortcut to success. No matter how tempting it may be to start a new business from scratch, buying an existing business is often the best option for entrepreneurs who want to hit the ground running. However, it’s important to weigh the pros and cons before you make a decision. This guide shared by Sauder & Stoltzfus explores both sides of the coin.
Pros of Buying an Existing Business
Established Customer Bases
One of the biggest advantages of buying an existing business is that it already has an established customer base. This means that you don’t have to spend time building your customer base from scratch. Established businesses have loyal customers who know and trust the brand. This can save you a lot of time and money on marketing and advertising.
Established Brand You Can Build Upon
Another advantage of buying an existing business is that it already has an established brand. This means that you don’t have to spend time and money creating a new brand identity. You can build upon the existing brand and make it even stronger.
Learn From the Mistakes of Others
Before buying a small business, thorough preparation is key to ensure success and longevity. Start by conducting a comprehensive due diligence process to understand the business’s financial health, competitive landscape, and potential growth opportunities. Understanding why do small businesses fail can provide valuable insights into common pitfalls to avoid. For instance, poor cash flow management, lack of market demand, and inadequate business planning are frequent reasons for failure. Additionally, consult with professionals such as lawyers, business brokers, and Sauder & Stoltzfus to ensure you’re making informed decisions. By taking these steps, you can position yourself for a successful transition into small business ownership.
Infrastructure in Place to Get Started
Buying an existing business also means that there is already infrastructure in place. This can make it much easier to get started. For example, the business may already have an office, equipment, and employees. This can save you time and money on setting up a new business.
Easily Promote a Change in Ownership
When you buy an existing business, you can easily promote the change in ownership by using online tools to create content marketing posts and share them online. There are many online resources available that can help you with the process.
Cons of Buying an Existing Business
Higher Upfront Cost
One of the biggest disadvantages of buying an existing business is that it has a higher upfront cost. You will likely have to pay more than you would if you were starting a new business from scratch. However, buying an existing business can be more profitable in the long run.
Unforeseen Liabilities That Can Impact Profitability
Another disadvantage of buying an existing business is that there may be unforeseen liabilities that can impact profitability. For example, the business may have outstanding debts or legal issues that you are not aware of. Credit reporting can be helpful. It’s important to do your due diligence and thoroughly research the business before making a purchase.
Limit Your Flexibility In Making Changes
Buying an existing business also means that you may be limited in making changes. The business already has established policies and procedures that may be difficult to change. This can be frustrating for entrepreneurs who want to put their own stamp on the business.
Buying an existing business can be a great way to become an entrepreneur. It can save you time and money, and give you a head start in building a successful business. However, it’s important to weigh the pros and cons before making a decision. Consider the existing customer base, established brand, infrastructure in place, and the opportunity to hone your skills while running the business. At the same time, be aware of the higher upfront cost, unforeseen liabilities, and limitations on making changes. With careful consideration, you can make an informed decision that’s right for you and your business.