Growing a business from start to success can be a long process. The business world is very fluid and constantly changing, putting new businesses at great risk of failure. This is why entrepreneurs might want to consider acquiring an existing business.
By acquiring an existing business you eliminate some of the start-up headaches and uncertainties, especially those headaches related to start-up costs, determining product lines, branding, hiring the right employees, and establishing a customer base that can sustain your business.
Acquiring an existing business can fast forward an entrepreneur past those early times where there is a high risk of business failure. In some industries like tourism or manufacturing where start-up is cost prohibitive, it’s really the only feasible way to get into the industry.
There are certain benefits that come with acquiring an existing business; however, you do need to make sure you aren’t taking on someone else’s business problems. Here are some things you should consider when looking to purchase an existing business.
1. Customers – When a business has a strong established customer base you will have to expect to pay more because of the “goodwill.”
2. Operations – When the business plan is proven to work you won’t have to worry about doing the groundwork yourself. You save time and money. The current owner can be a wealth of information to your family.
3. Product – An existing business that’s established has inventory, and the profit margins are already established, and you have a good idea of what works and what should be changed.
4. Employees – Long-term workers can be a wealth of information to you as the new owner. They can provide you with wonderful insight about the business and their experiences working at the business. They may even have excellent insight outside the business relating to the industry, suppliers, etc.
5. Financing – When you acquire an existing business you have a proven track record pertaining to cash flow, revenue, expenses, inventory purchases, etc. that can help you make good business decisions moving forward. It certainly makes it much easier to project future profits since much of the guesswork has been eliminated.
Acquiring an existing business is not for everyone, but it’s certainly a viable option. If you are considering becoming an entrepreneur you’ll want to weigh the pros and cons of starting a business from scratch or acquiring an existing business. For many, the best option is the latter.
