Advantages and disadvantages of buying a business
Buying the perfect business starts with choosing the right type of business for you. The best place to start is by looking in an industry you are familiar with and understand. Think long and hard about the types of businesses you are interested in and which are the best matches with your skills and experience. Also consider the size of business you are looking for, in terms of employees, number of locations and sales.
Buying an established business rather than setting up a new business has many advantages but is not without risk. You will need to know the advantages and disadvantages of buying an existing business and be clear about your ability to run a business.
Advantages of a buying business:
- When you buy an existing business, you’ll already have a good idea of how well the market has reacted to the products or services offered.
- Buying an established business means immediate cash flow.
- The business will have a financial history, which gives you an idea of what to expect and can make it easier to secure loans and attract investors.
- Existing premises – eliminates the need to search for new premises and the tension of lease negotiations.
- Knowledge Transfer — you can learn about running the business from the current owner, which helps you to gain an insight about their experiences and also use their expertise.
Disadvantages of a buying business:
Keep in mind that not every business on the market is a good prospect. Many owners will be selling unprofitable or under-performing businesses. While this can be a chance to buy and develop a cheap business, it can also be a risky investment.
- The business may have a bad image that is very difficult to change.
- The cost of acquiring trust and goodwill may be very high.
- Staffing problems, such as disgruntled employees or frequent turnover.
- Equipment that is outdated or prone to issues.
- Existing debt or cash flow issues.
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