Why Buying a Business Makes Sense as a Sound Strategy


For many entrepreneurs the idea of starting a business from scratch may seem overwhelming. For them, buying an existing business or a franchise is often a viable alternative.

Finding profitable businesses for sale at reasonable prices can be difficult. Business owners often have an inflated idea of the market value of the business. There are, however, many resources for finding profitable businesses for sale. Depending upon the type of business you are interested in buying you can find many listed in local and online classified ads. Business brokers are also available locally and online.

Do watch out for business opportunities that are scams. The Department of Trade and Industry (DTI) provides a substantial amount of information about scams and false business opportunities. The DTI is also a good resource about deceptive practices that a business may have engaged in. You also may want to take a look at Business Opportunity Scams and Work at Home Schemes in Google.

Advantages of Buying a Business

Among the many favorable aspects to buying an existing business is the drastic reduction in start-up costs. In addition, cash flow may be immediate because of existing inventory and receivables. Other positive side effects include existing goodwill and easier financing opportunities.

Disadvantages of Buying a Business

Among the biggest downsides to buying a small business is the initial cost of the purchase. Because developing the business concept, customer base, brands and other fundamental work has already been done, the costs of acquiring an existing business may greater then starting up a new business. Other possible disadvantages include hidden problems associated with the business and receivables that are valued at the time of purchase, but later turn out to be non-collectable.

Once you have found a business you might want to buy, you will need to research the business to determine whether the stated reasons for selling are valid and whether it is valued appropriately. Additionally, you need to conduct due diligence and draw up an airtight sales agreement.

It is important during the closing to make sure that you have legal counsel available to review all of the documentation necessary for the transfer of the business. Ask an accountant, business consultant or even a friend to make certain everything is in order before you close the sale.