The Pros and Cons of Buying an Existing Business

Buying an Existing Business

Here are the Pros and Cons

Are you thinking about buying a business? Learn about the pros and cons of buying an existing business before you move forward.

Buying existing businesses

A record number of businesses were sold in 2019. That number continues to trend upward from previous years as baby boomers seek to retire and millennials begin to realize there might be limited exit options for their would-be unicorns in a public market focused on profit….

The economy is still doing well. Most businesses that sell are financially healthy, with cash flow to pay off the acquisition price.

While buying an existing business definitely has its advantages, there are also a few downsides anyone looking to buy should be aware of. The more you understand the nuances of buying an existing business, the more successful you'll be. 

We want to help you understand the pros and cons of purchasing an existing business. Keep reading to learn more. 

Advantages of Buying an Existing Business

It's not easy to start your own business. Statistically speaking, most startup businesses shut their doors within five years. 

Which makes buying an already established business that's proven to be financially successful a smart move. The hard work has already taken place to get past liftoff and into the atmosphere of profitability.

Access to a Network of People

When you buy an existing business, you get access to an existing network of people who can help guide you and your business including:

• Loyal customers

• Vendors

• Suppliers

• Employees

Also, if the existing owner has established relationships with banks, printers, advertisers, and insurance companies, it's much easier than trying to embark on those relationships from scratch. 

Established Brand

Branding is an essential part of marketing. Without loyal customers, there is no viable business. 

Buying a small business with a well-established brand name makes it easier for you to reach out to attract new business. 

Fewer Financial Surprises

There's a lot of risks a new business owner takes. But when the seller already has everything in place, that means the business is already operating and pricing has already been established. 

There's less of a chance you'll get caught in a money pit because the seller should already have provided you with the financial documents. 

Also, the sale is structured so you can cover all your expenses including the debt service and your salary. 

The Disadvantages of Buying an Established Business

While the business may already be well-established, that doesn't mean a few changes may be necessary. It's also difficult to fully comprehend what changes are needed until you've already purchased the business. 

However, here are a few red flags to look out for:

• High employee turnover

• Outdated or unreliable equipment

• Unreliable suppliers

A business that carries existing debt or has cash flow issues also will mean there's hard work ahead of you to get back into the black. And it's not always easy to walk into an already established business and try to change the rules. 

The Brand May Be Established But Suffer from PR Issues

While it's great to buy a business with an already established brand name, if the company suffers from PR (public relations) issues, you're inheriting a potential disaster that is now your job to clean up. 

Even a new owner may not be enough to change the minds of unhappy former patrons. Make sure you buy a business with a positive reputation. 

A Cheap Business Isn't Necessarily a Good Thing

If a business seems inexpensive it's usually not a good thing. An expensive business means it's doing financially well and has a good reputation. 

A cheap business may mean it has a bad reputation or a good or service isn't performing well in the market. Always ask yourself if it's worth the money and the work you'll need to put in to ensure a company stays successful after you've bought it. 

Start Getting Matched With Acquisitions and Make Some Inquiries

The best way to get going on buying your first business is to start looking at opportunities and reach out to connect with the seller or the seller’s business broker if you’re serious about any specific opportunity. As a buyer, at no cost to you, you can set up your profile and acquisition preferences today on BizNexus and we’ll start showing you opportunities from our $1 billioin+ inventory platform that makes sense for you.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

New Franchise Opportunities: Choosing the Right One for You

New Franchise Opportunities

Choosing the right one for you.

With a plethora of advantages to starting a franchise, your only hurdle may be determining which new franchise opportunities to choose from.

New franchise opportunities

In 2017, there were a whopping 745,290 franchises in the United States.

Those with entrepreneurial minds who don't want to go out on a limb and create a completely new business may want to add theirs to the list. And if you're interested in new franchise opportunities, how do you choose which one is right for you?

In this blog post, we'll discuss how to choose the franchise you'll succeed with. Franchises are a better bet for investment due to the fact that they come with a well-known brand. While that's already on your side, your franchise also has a higher rate of success if you pick a franchise that works for you.

Read on for more tips and tricks for choosing the best franchise for you to invest in.

1. Choose a Brand You're Passionate About

You may see that a certain brand of franchises is booming at the moment, but they're selling something you don't really know much about. What's more, you may not even have an interest in what they're selling, but you see the opportunity as a way to make money.

Instead, resist the urge for a high turnover of profits immediately in order to invest in a franchise you have a passion for. You'll succeed in the long run if you're doing something you love, and working with a brand you can stand behind.

2. Buy a Franchise That Has Lots of Support for Its Business Owners

While you should never purchase a franchise not knowing anything about business, you should have a strong support system from corporate. Discuss whether they have a strong backing for their franchisees, and how much support they actually give them.

Don't go for a franchise that leaves business owners flailing and wondering what to do next without the hope of help.

3. Pick a Franchise with a Good Reputation Among Franchisees

When looking for your next business opportunity, you may have been crushed to find out that your favorite chain restaurant doesn't work well with franchisees. Or, you may have found out that they've had incidents in the past and many unhappy business owners.

Don't then decide to franchise with them because you're loyal to the brand. While you can still remain a consumer of the brand, you'll want to ensure that corporate works well with people like yourself.

4. Choose an Affordable Investment

Depending on which franchise you buy into, you'll have to choose a franchise opportunity that doesn't blow through your budget. As a business owner, you don't want to spend everything you've got on the franchise fee. You'll need to take this on board when choosing the right brand to work with.

Taking Advantage of New Franchise Opportunities

Opening up a franchise is a big decision, but it can be incredibly exciting, and you'll want as much information as possible when you're just beginning. Here are 8 things you should know before buying a franchise.

Check out BizNexus Blog, which is all about new franchise opportunities to help you make the leap from searching for an opportunity to being a business owner.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.