The main benefit of buying an existing business is all the legwork has already been done. Getting a business off the ground is often the riskiest and most difficult stage of any new business venture. It is safer and more profitable to buy an existing business than start a new one. According to the Small Business Administration, more than 50% of startup businesses fail due to unproven concepts, lack of working capital, and poor management.
Some other advantages in acquiring an existing business include:
- The ability to review a company's existing track record substantiated by profit / loss statements, tax returns and other financial records.
- Growth potential can be measured based on actual experience rather than conjecture associated with startup ventures.
- The need for additional working capital is reduced due to the immediate cash flow already being generated by established customers.
- Skilled employees who are familiar with the business operation are already in place.
- Existing licenses and permits can often reduce the time and cost of making application, gathering information and conforming to required regulations.
- Location / demographics have already been market tested & proven.
- Pricing and competition are already known quantities.
- Policies and procedures are in place.
- Established suppliers / vendors are already in place.
- Established relationships with professional advisers, insurance companies, advertisers.
- Furniture, Office Machines & Communication Equipment are in place.
- Established market presence, such as a website, is already in place.
- Sources of capital to purchase existing businesses are more readily available than startup ventures.