If you don't want to start from scratch, buying an existing business may be an excellent alternative. Let's take a look at some of the advantages and disadvantages of buying an existing business.
Advantages of buying an existing business:
- Immediate operation. Operations can start immediately.
- Quick cash flow. Existing inventory and receivables can produce quick cash flow.
- Existing customers. Customers and suppliers have already been located, and relationships with them have been established.
- Existing goodwill. Goodwill toward products or services has (presumably) been created.
- Easier financing. Financing is easier to obtain because the business has a track record.
- Eliminate competition. Buying a business may eliminate a competitor that you would have had had you started from scratch.
Disadvantages of buying an existing business:
- Cost. Buying a business is sometimes, but not always, more costly than starting one from scratch.
- Problems. There may be inherent problems in the business, some of which may not be apparent until after the sale.
- Obsolete goods. Inventories and equipment may be obsolete.
- Personality conflicts. Your personality may clash with existing managers and employees.
- Uncollectable receivables. Bills owed to the business by its customers may be old, stale, and ultimately worthless.
Why Buy a Business?
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