There are many reasons why a person would consider buying a business that is already up and running.
You may have certain strengths which can be utilised in a business that is weak in those areas where you have strength and as such the target business would be of considerable value to you as you could easily improve it. To other prospective purchasers the businessÃ¢ÂÂs weakness would not be so appealing to them. Or if they were to make the purchase the risk would be reflected in the price they offer for it.
In general terms a business that is already up and running would offer a purchaser the following benefits:
- The business is up and running in a given market/sector.
- It has a name some branding, customers and a reputation.
- The business has trading history with a known level of income and expenditure.
- The workforce will have knowledge to run the operation, albeit under your guidance/control.
- With each of the areas identified above a prospective purchaser will have room to improve it but importantly he will have a foundation to build upon.
Conversely there are disadvantages of buying a business that is already up and running.
Firstly, and something which is often overlooked – why is the seller selling? You need to establish this at the outset.
You need to consider the purchase price and all ancillary costs. See the Cost CalculatorÂ for an indication of costs. You would also need to budget for other professional fees which will depend upon the nature of the business you are purchasing.
Key areas of the business may require further investment in terms of financial or manpower which will be costly and they will come at a time when you have already paid the purchase price.
Ailing areas will need to be addressed quickly so as to avoid any (further) downturn.
You will probably take on the business with the good, the bad and the ugly.
The seller may have had a lot of personal involvement with the customers and as such his further involvement to assist in the handover may still be required for a period post completion to protect your investment.