People interested in starting a business have many options available to them. There are countless franchise opportunities available, starting from scratch, partnering with another entrepreneur, or buying an existing business. For those who do not have direct business ownership or operational experience, buying an existing business may be the best way to go. These are a few reasons why it’s beneficial to buy existing businesses.
Lower Startup Costs
The U.S. Small Business Administration suggests that the startup costs for existing businesses are often much lower than they are when building a business from scratch. Combine that with the likelihood of faster, if not immediate profitability due to existing inventory and receivables for the business, and your financial risks and burdens become significantly less substantial. This is all assuming, of course, that the business had a positive cash flow when you purchased it.
Building on an Existing Brand
Building a brand in the world of business today is as rough as it is tough. When you buy a business that is already successfully branded, you’re buying the right to so much more than the merchandise and physical location of the business.
You’re buying the name and the goodwill in the community the existing business enjoyed. This makes cold calling and relationship building with other businesses in the community much easier than if you were an unknown entity trying to build a business from scratch.
Financing in today’s business climate isn’t as easy as it has been in the past – especially for new, untested businesses. It’s much easier to get financing to purchase a business that’s already profitable, according to the International Business Brokers Association (IBBA).
Perhaps the most important factor to consider in your favor when purchasing existing businesses is that the business has already built relationships with customers and vendors alike. While you may want to shake things up eventually, it’s always a plus to know you have customers in place when you open the doors to your new business.
The IBBA warns, however, that it’s important to keep risks in mind when purchasing existing businesses. There is no such thing as a risk-free business venture. Practice due diligence before engaging in any business venture in order to buy with confidence that you’re making a good deal for yourself and your financial future.
Additionally, it’s important to protect the investment you’ve made in your new business. You’d never think to leave the doors open at night for anyone to walk in and take the inventory you’ve worked so hard to supply. For this reason, you should also make it a priority to invest in business insurance when you buy an existing business – to protect your business from dangers doors can’t keep at bay.