It’s one thing to talk about selling a business. However, talk about actually buying a business and it turns out to be a completely different ball-game altogether. Sure, there is little doubt that on the surface, it does seem like an easier option, rather than selling a business, or even setting up a new business for that matter. At least as far as the general risk factor is concerned, this is true.
Basically, let it be said that along with many advantages, buying a business does indeed have its share of risks as well. That is something no one can really deny. However, without knowing the advantages and disadvantages in their entirety, one really can’t be that sure about the sheer required ability to run a business. After all, it isn’t something that can be done in an extremely casual manner.
On that very note, you can be sure that one would need to thoroughly examine some of the principal advantages and disadvantages related to buying a business. Here are a few advantages :-
- No startup work required: All the required startup work has already been done. Hence, there is no need for you to worry on that particular front, since all of the procedures and plans are in place.
- Cash flow: You can be sure of the fact that by buying an already established business, there is immediate business cash flow .
- Financial history: Since the business at hand already has a thorough financial history, you can be sure of the fact that you will have a good idea what to expect in general. This in turn, will also make it easier to attract investors, as well as secure loans.
- Existing customers: You won’t have to worry about building a customer base from scratch, as the existing customer base will be there for you to increase and expand in general.
- An established market: There will be no need for you go through the headache and hassle of starting afresh with regard to looking for new markets for your service/products. You already have an established market at your disposal as well as
The disadvantages :-
- Major improvements: The business may very well be in a derelict state with dire need of improvements with regard to newer equipment and plants.
- Uncontrollable external factors: This refers to factors like increasing competition or a declining industry. Factors that depend on the market, can very well affect your potential future growth.
- Problems of location or management: There are very few things you can do about certain factors like bad management or an improper location, for instance. You will just have to find a way to work around these kind of problems.
- Initial or added investment: There is often a large amount of money to be invested up front, as well as the aspect of added investment in order to make under-performing businesses profitable. In the long run, this can be quite a drain on your resources.
Ultimately, you will need to weigh both the advantages as well as the disadvantages and then accordingly take the call. You can’t afford to forget the fact that you need to take your very own personal situation into consideration as well. No two ways around that, really.
Just because most people around you happen to be in the process of buying a business, doesn’t necessarily mean that you should too. Everyone’s individual situation is different, so do be careful to weigh the pros and cons before making the ultimate decision.