Advantages and Disadvantages of buying a business

As with any purchase when you buy a business there will be the obvious advantages to acquiring something and the obvious downside that you have to spend something to make that acquisition. To stretch the metaphor a little further you are buying something that someone else has made, and if you were capable enough you could, for instance have made that radio with a better volume knob.

Yet, in many circumstances you are not or do not have the time to learn the skills, or prefer to pay for the radio itself rather than take the risks of acquiring a radio piecemeal when there is no guarantee of your ever having the ability to assemble the parts.

A ready-made business will have had some of the groundwork already done in getting the business up and running. This may be allied to the fact that it may be easier for you to get finance as the business will have a proven track record. A market for the product or service will typically have already been demonstrated and there may be established customers. This should mean a reliable income, a reputation to capitalise and build on, and a useful network of contacts. This could mean a negative consequence in that you will need to honour or renegotiate any outstanding contracts the previous owner has left in place – which may bring its own problems.

In buying an existing business you might hope that a business plan and marketing method are already in place. Existing employees should have experience you can draw on, as will in a sense the business, meaning that many of the problems will have been discovered and solved already. Think about the feelings of current staff – it’s possible they may not be happy with a new boss, or the business might have been run badly and staff morale may be low.

As mentioned above the major downside may be the obvious monetary concerns – to buy a business you often need to invest a large amount up front. You will have to budget for professional fees for commercial solicitors (Lawdit) , surveyors, accountants. Realistically if the business has been neglected you might need to invest quite a bit more on top of the purchase price to give it a best chance of success.

And if you ever bought anything second-hand you’ll know this one – you need to consider why the current owner is selling up?

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