The advantages of buying a business
So you want to run your own business. Or add to what you already have. You can start one from scratch, buy one that already exists or invest in a franchise. If you seek a certain level of independence, but don't have the desire to create your own signature product or service, there are many advantages to buying an independent business.
Instead of wondering how a start-up will get off the ground and grow, you can research the history of an existing business. You can correct past flaws and improve upon its successes.
Another obvious advantage to buying an existing business is that you’ll be doing business right away, much faster than with a start-up. It probably already has suppliers, customers, employees, equipment, cash flow and systems in place, as well as the permits and licences it needs. Zoning requirements have been met and there is an online presence.
With the business’ existing track record, it may be easier for you to get financing. Advice from the previous owner could help you transition. Relationships, goodwill and reputations are established. Growing pains have likely been resolved. There will always be new challenges, but you should be able to focus on innovation and creativity.
A big challenge is that the upfront costs could be steep. You may also need to:
- Work at keeping up relationships
- Handle employees who are resistant to change
- Improve the existing image
What to review
When you decide to buy a business, there’s a lot to examine and understand. It is prudent to get professional advice from your lawyer, your accountant and even a business valuation expert. Areas to review include:
- Taxes and legal issues – Don't take on anything unresolved.
- Receivables and payables – Are accounts up-to-date? Any liabilities?
- Inventory – What quantities will you start with?
- Real estate – Is the property suitable? Is there a mortgage? What are the terms of the lease?
- Equipment – Second-hand equipment can help with negotiations.
- Employees – Learn what you can. Be prepared to make adjustments.
- Market – Who is the competition? Will you need to change the offerings?
- Website – Does it rank poorly on the business category’s important search terms? It may take a lot of work and time before it starts contributing to sales.
Buying an existing business involves more facts and less guesswork. Interested in more information? See our section on buying a business or starting your own.