Why You Should Buy an Existing Business

From the Archives: I wrote this back in 2014(!) when I was a Partner with Murphy Business Atlantic. I was a little green behind the ears at the time. But the information is still sound today.

As an entrepreneur, I love startups. There’s something sexy and energizing about a completely new business that fights its way to success from the ground up. Unfortunately, this image is not always realistic, nor is it often practical. For many people, depending on their personal situation and circumstances, a startup business simply isn’t a great option.

 That’s why many entrepreneurs choose to buy an existing business. Buying an existing business is a great alternative for many reasons, some of which I have outlined below.

 Operations: Starting a new business is full of hiccups, delays, and obstacles. Getting a quality product out the door in a reliable fashion takes time and patience. Buying an existing business lets you hit the ground running. The process is already in place – you just need to get out of the way. Adjustments may be required, but can be introduced over time, once you have familiarized yourself with the business.

Products: Developing a great product line, and knowing which products will be profitable, takes time and experience. When you buy an existing business, your products/services are already in place and the financials don’t lie. You know what they’re capable of and where you make your money. And you can always add new products later, but at significantly less risk than a new company.

Training: Learning a new business is a process. Starting from scratch will almost certainly involve many mistakes, both large and small. When you buy an existing business, it’s common for the owner to stay on for a period of time for training and continuity. Although you will still make mistakes (we all do!), having the previous owner in place for guidance can reduce their frequency and severity.

Employees: Good people are the backbone of small businesses. Finding these people is hard and can take years of costly hiring to find the right ones. An existing business, assuming it’s a strong business, likely already has these pieces in place. This can save you significant time and money when compared to building a brand new staff from scratch.

Customers: Building a loyal and returning customer base is difficult. Any good business knows that its existing customers are its lifeblood. Replacing them is expensive and extremely difficult. By acquiring an existing business, these customers are already in place. This increases the likelihood of your success, and also eliminates the working capital that would be required to build and finance a new customer base from scratch.

Financing: The reality is, financing a new business is hard. The big banks avoid startups like the plague, and those who will finance you are expensive. But with an existing business, you have proven cash flow. Financing an existing business is still hard. But buying a business with strong historical financial performance certainly helps.

There are plenty of reasons to buy an existing business – many more than I have listed here. Ultimately, it all comes down to fit. If you do your research and pay a fair price, buying a business can be an excellent way to achieve both personal and financial success, while minimizing the risk factor often associated with starting a new business.

So what are you waiting for? Start your search today.

Disclaimer: I am (thankfully) not a lawyer, nor am I an accountant. If any of this sounds like legal/financial advice, it's not. Take everything I say with a grain of salt. But not too much - I hear it's bad for your blood pressure.