Starting a new business can be rewarding- but the entrepreneurial route isn’t for everyone. Sometimes, it’s best to buy an existing business to avoid the painful startup period. That being said, while there are many advantages of buying an existing business, there are also some disadvantages as well.
In this blog, we’ll take a closer look at the advantages and disadvantages of buying an established business. This will help you make the right decision for you.
Advantages of Buying an Existing Business
If you want to run your own business but you’re worried about the startup period, you might want to consider buying an existing business. There are several advantages to doing this:
The product or service has already been market tested
When you buy an existing business, you’ll have an idea of how the market has reacted to the products or services.
Startup time is significantly reduced
In addition to the products/services already being market-tested, you’ll be able to get started selling quickly. When you get started from scratch, you have to consider:
• Inventory
• Suppliers
• Employees
• Location
However, with an existing business, all of this is already in place. You don’t have to worry about any of it.
Brand is established
Branding is critical to establishing and expanding your customer base/presence in the market and it’s not easy to start a new brand in a crowded marketplace.
Financing is easier to secure
If you need additional working capital, you’ll have an easier time accessing it when you purchase an existing business instead of starting your own from scratch.
Established Customer Base
The business has already been running, so they already have a customer base that will continue to make purchases under your ownership.
Disadvantages of Buying an Existing Business
As mentioned, there are also some disadvantages of buying an existing business. These are as follows:
You get what you pay for
There are very few business owners that will sell their successful business for a cheap price. If the business is doing well, the owners will likely have a high price on it so they receive a decent ROI.
You may need to make some operational changes
When you purchase an established business, you may also be getting some issues with it. Some of the warning signs you’ll want to watch for include:
• Staffing issues
• Unreliable suppliers
• Outdated/problem equipment
• Debt/cash flow issues
Keep in mind that sometimes when you try to implement changes, you end up creating new issues. Therefore, before making a purchase, try to find out as much as you can about the business.
You may get scammed
It’s also important to understand that not everyone is honest. Some unscrupulous sellers may try to scam you. They may not tell you all you need to know. To avoid this, have an attorney review the legal documents and do plenty of research before purchasing an existing business.
It may be a challenge to make it your own
When you purchase an existing business, you are stepping into another person’s vision and you’ll have to work hard to make it your own. Here are some ideas for doing this:
• New product/service offerings
• Change the operational structure
• Make updates to the branding
• Change décor
These changes do require time and money and you may never feel like it’s truly yours since you didn’t start it.
You may be buying a bad reputation
If the business has had PR issues, it could be detrimental to your sales. Many mistakes could damage your career, even if you were not the owner when the issues happened.
Conclusion
Starting a business can be hard. Many people find that buying an existing business is a better option. While there are many advantages to taking this route, there are also many disadvantages as well. Contact Aspen Capital Solutions to learn more about your options for starting a business.
