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09 August 2016

The Pros and Cons of Buying a Business

Posted By: AIB Business

Buying an existing business can help your company expand into new markets and new product lines.

In some situations, buying an existing business can help you grow your business faster. You can buy your way into new markets, new products and new employees. Buying an existing business has many advantages, but there are also some drawbacks. A business owner may wish to sell a profitable, well-run business for many reasons, so selling does not automatically indicate a problem. However, you should not assume an existing business is self-sufficient and profitable. Potential buyers must conduct adequate due diligence to discover the true short and long-term financial and marketing position of the company before buying it. 

The Pros

  • Easier purchase financing because of the company's proven track record
  • Existence of an established customer base, allowing early and ongoing sales
  • Existing profitability, allowing for the generation of regular income
  • An established marketplace
  • The ability to focus on improving products and services because operating facilities and employees are in place
  • Established stocks
  • The former owner's expertise and knowledge of the company and its markets
  • Existing business records to guide decisions
  • The initial financial outlay is known and may be less than that for starting a similar business from scratch.

The Cons

  • Inheriting hidden and unknown problems or financial burdens
  • Being stuck with the company's bad reputation
  • A less-than-ideal location
  • Facilities and equipment that may be outdated or in need of repair
  • Difficulty merging two business cultures.

Buying a business is a complicated process involving many types of skills. You should retain professional advisers, including a qualified solicitor and an accountant, before you embark on this challenging but rewarding journey.


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