Pros and Cons of Buying an Existing Business

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Owning a business can be a very exciting and profitable experience. Some people enjoy owning a start up business. For people that want a business that has proven to be profitable in the past though, they can buy an existing business. Exisiting businesses give you the opportunity to have a head start in the organization process of a business when you buy it. You might even be able to get assistance from the previous business owner with ideas and marketing plans to keep your business profitable.

Significance

Buying an existing business gives someone that is interested in owning their first business an opportunity to own a business without completing all the paperwork and start up work involved when creating a new business. Buying an existing business can reduce the risk of owning a brand new business. According to Start Up Nation's website, between 75 and 90 percent of all new startup businesses fail in the first 10 years. This is why purchasing a business that has been in business over 10 years can be very beneficial compared to a very new business.

Time Frame

Purchasing an existing business can take less time than creating a start up business for several reasons. The first reason is because the business will already have a client list and suppliers, saving you from having to build up these resources. Existing businesses may also already have a physical location that they own or are renting. If you purchase a business, the owner will quite often be willing to either sell the building if he owns it or rent it to you along with your purchase of the business. If the business is renting space, you will need to ask the landlord if the lease can be transferred to you as the new owner of the business. An existing business will already have any legal approvals necessary from local government for that particular business, saving you time from having to apply for approvals.

Geography

An existing business will already be established in it's current location. As the buyer, you can analyze if this location, based on the company's history, has been profitable for it. This is unlike a start up business where your decision to choose a location is based on market research only. When buying a start up you can base success of a location on similar businesses, but when purchasing an existing business you will have solid statistics for the business you are purchasing. If the business has not been very profitable in the current location, you can consider purchasing the business and relocating it.

Benefits

Organizing a business you own can be much easier if it is an existing business. You will already have a customer list from the previous owner. You also will have the opportunity to offer jobs to any employees the previous business owner employed, and also be able to get feedback from that owner about the employees before deciding to hire them. Existing businesses also typically have name recognition among the local community, which could reduce the amount of money you need to spend on marketing when compared with a new business you are starting. As an existing business, any existing supplies or inventories associated with the business can be purchased in the sale of the business, this can save you a lot of time as the new business owner.

Considerations

Just because a business is already existing does not mean that the business can not be improved. You should create a business plan just like you would when starting a new business. Some considerations you will want to address in the business plan include the financial expenses you anticipate over the first five or ten years of the business, your marketing plan for the business, expenses that might be coming in the near future including repairs to the building if you will own it, projected financial information, and any plans for expansion. Purchasing a business without your own plan will result in a loss of time and direction after purcashing the business.

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