Buying a business may provide considerable benefits over starting a new business. However, before deciding on what path to take, you should understand the advantages and disadvantages related to both options.
An existing business already has an established customer base, an established location, inventory and suppliers, trained employees and a reputation in the market; you only have to improve or keep up on what has already been achieved. When purchasing a business, the financial statement of the business somehow helps to establish a value for the company. The company may show significant receivables on the company’s balance sheet’s. The issue is whether these can actually be collected or will eventually be written off as bad debts.
Starting a business is certainly risky as you have to deal with many uncertainties. These uncertainties are usually about the profitability and customers’ response to the company’s products and/or services. When you start a company, you will be in full control. At the same time, you will be able to develop the business according to your own specifications. You can gather your own management team as you can have the freedom to select the best people you can work well with and as a team.
Furthermore, when you buy a business, you absorb the people already in place and it takes time to get rid of the poor performers. In an existing company, the new owner may struggle to implement changes because the policies and procedures are already in effect.
Addressing the current business owner these significant concerns can help you assess the existing business.
Buying a business involves a huge amount of money, so its legal and financial aspects are extremely important. Therefore, it is necessary to seek legal assistance. Look for a competent lawyer and accountant to perform due diligence on the business you plan to take over. Business Due Diligence is a procedure performed to review and verify all the relevant information about the business you are considering. A competent lawyer will be able to:
Yes, you can purchase the business, excluding the company running it. This option is beneficial because the new business owner will not absorb the liabilities involving the first company. But this option may need to consider such cases where there are business licenses that are difficult or no longer possible to obtain.
