Are you wondering about the advantages of buying an existing business? Sometimes people look into creating their own startup but then wonder if it would be better to buy an existing business instead. So today, we will look at some of the advantages of buying a business instead of starting one from scratch.
What are the advantages of buying an existing business? Here is the list of 16 advantages of buying an existing business.
- Access To Company’s Assets
- Having an Established Brand
- Existing Customer Base
- Established Supply Chain
- Established Staff
- Established Cash Flow
- Business Operations and Standard Operation Procedures Already in Place
- Easier To Transfer Permits and Licenses than to Obtain New Ones
- Better Chance of Overall Success and Growth
- Have an Understanding of Financial History
- Better Financing Options
- Reduction of Startup Time
- Less Research Needed
- Less Risk
- Less Work
- So Much More Fun
There are 16 distinct advantages of buying an existing business instead of creating one from scratch. You will learn about each of these advantages in more detail in this article. Here is the list of 16 benefits:
16 Advantages to Consider When Choosing to Buy an Existing Business
Keep on reading to get more detailed information on each one of these 16 reasons you may want to look into buying a business!
1. Access To Company’s Assets
When buying a business, you are usually not just buying the name but many other things that come with that name, including any assets and supplies needed to run the business.
For a simple example, let’s say you are buying a bakery. Many items in that bakery will either be included in the price or worked into the contract. If it is supplies, and equipment this may already be included.
Things like who owns the building, how the lease will be transferred, and other things related to permits and license transfers will need to be taken care of before signing the contract.
If you were starting your own bakery from scratch, all these supplies and materials would have to be bought ahead of the opening, so this is a big win! In a brick and mortar bakery, here are some items that they may already have in the building that are part of the business you just bought:
- Convection Ovens
- Food Processors
- Turnover Machine
- Prep Tables
- Baker’s Shelves
- Display Racks
- Stand Mixer’s
- Mixing Bowls and Spoons
- Measuring cups, spoons, and baking pans
- Storage Bins (for large quantity ingredients like flour and sugar)
- pastry bags and tips
- Proof Boxes
- Refrigeration Units
- Shelves and Cupboards
- Serving Trays and Plates
- Tables and Chairs (if customers can also eat in the bakery)
Now, look at that list. Imagine the cost of getting all the correct equipment and supplies you need before opening your bakery. When you buy a bakery from someone else, most of these things are already there and part of the cost of the entire business. This is a huge money and time saver.
2. Having an Established Brand
Another clear advantage is having some brand recognition for the business before your first day. Of course, this could just be a local brand recognition if you buy a small local business. Still, you can also buy larger enterprises that could have brand recognition regionally, by country, or globally.
Brand recognition is not easy to build, and it takes a long time to do so. However, in today’s market, brand recognition is one of the most essential parts of any business today. Understanding a brand is understanding who they are as a business, what they have to offer, their core values, and so much more.
3. Existing Customer Base
Another positive of buying a business is that you already have an existing customer base. Whether you are purchasing a brick-and-mortar business or an online business, people know the brand and already shop there. As a result, you will not have to wait long for your first sale.
Buying a business is usually more about turning a business around, taking it in a new direction, or growing a moderately successful business. This will make your overall job easier from the first day.
4. Established Supply Chain
When you buy a new business, this company will already have relationships with suppliers for everything you need. It is possible to work out better deals or replace suppliers later if you prefer someone else.
Still, you do not need to start your business by doing a ton of research and cost-pricing on who supplies the things you need and making sure they can provide your business as well.
This has already been done for you. This is yet another time-saver that allows you to start working on whatever other projects you need to do for the business instead of wasting time figuring out things like:
- The best supplier for ingredients.
- How to get great packaging.
- Or other materials you need every day.
5. Established Staff
When you buy a business, as long as it is not only run by the owner, you will also inherit a staff. This means you will not have to go through countless resumes, interviews, and a long process to get someone to run your business.
Besides not having to go through the hiring process, the staff will already be well trained in the company’s standard operating procedures, the industry, and whatever rules and regulations you need to abide by. So again, this is a massive time save having people who already know what they are going on day one.
6. Established Cash Flow
Another positive is having an established cash flow. If you opened a new business from scratch tomorrow, your cash flow could be next to nothing., It takes time to develop a brand and customer base.
When you buy a pre-existing business, a cash flow is already there. This will allow you to focus on improving upon the company or bringing it to your own vision instead of just getting into the black.
7. Business Operations and Standard Operation Procedures Already in Place
When you start a new business, there is a lot to do. One of those things is figuring out how to actually run the business. For instance, most companies have a list of Standard Operating Procedures (SOP).
This would cover everything from hiring practices, employee rules, information on billing, contracts, and how to process paperwork or deal with customers. This is very detailed and covers everything from day-to-day operations to handle all possible situations and problems.
As you can imagine, this is a very time-consuming process that takes a lot of thought and brainstorming to cover everything you may encounter. However, inheriting this type of information and research in regards to your new business is terrific.
Sometimes, people have an easier time seeing what they would like to change and how to make the company better once they see it all written down and laid out in black and white.
8. Easier To Transfer Permits and Licenses than to Obtain New Ones
Although this is not a big one, more like a nice bonus. It can be easier to transfer permits and licenses than to go out and secure new ones.
9. Better Chance of Overall Success and Growth
Sometimes, it is easier to look at something and see its flaws and how to fix it than to create the perfect item from scratch. As someone interested in owning a business, you have probably known this for years.
Have you ever been in a store or saw some type of company and thought it is a great company or product, but it was missing XYZ, and if that was added, it would be better? You will be able to come in from the outside, with an outside perspective, and see all the places that their business operations are weak.
This will allow you to focus on what needs to be fixed or what needs to be added to make a successful business even more successful. Growth will also come quicker when you are only tweaking and changing certain aspects instead of figuring out how to run all aspects of the business at once.
10. Have an Understanding of Financial History
When you have a startup, you are flying blind outside of the research you have already done of how much money a potential business venture could make based on all the factors that will be comparable to your own. But this is just an estimate; you do not really know how much better or worse your own company will do.
It is entirely different when you are buying a company. You will have access to their books, and you will actually see how much money they bring in and what the actual expenses are.
When you look at the history, you will not only understand the current and previous numbers but have solid data to apply to whatever your own plans may be.
Here are some of the things you may see in regards to financial history:
- Advertising Costs
- Marketing Costs
- Tax Returns
- Cash Flow Documents
- Balance Sheets
- Sales Records
- Dent Disclosures
- List of Assets
- Loan History
- Outstanding Investors
11. Better Financing Options
Because this business has already been established and years of financial history and customer data, you will be able to secure any additional needed financing easier. You are not trying to get loans or investments based just on you, your management team, and an idea.
Now you have all of that along with what this company or brand has already accomplished, a pattern of growth, and your own thoughts on improving the business going forward.
12. Reduction of Startup Time
This is somewhere where there is a vast difference between what needs to be for a startup versus what needs to be done when buying a business. Buying a business takes a little bit of time, sure, but certainly not years and years – which is actually possible when you are talking about having your own startup.
Buying a new business will entail finding the company, making the offer, securing the finances, signing contracts, and the business changing hands. Sure, there will be a little bit more involved, but that is a pretty simplistic summary.
Startups can take months (if you are flush in cash and do not need to do any research at all, which is unlikely) to multiple years. Here are some of the steps that you need to do with a startup:
- First, come up with the basic idea.
- Ponder the idea, flesh out the details.
- Research all possibilities, including revenue streams, potential pitfalls, and the competition.
- Write a business plan.
- Secure Financing.
- Secure location, permits, licenses, and anything else needed for the physical location.
- Purchase all equipment and supplies needed.
- Hire a staff, locate and secure contracts with vendors.
- Come up with and execute a marketing and advertising plan.
- Have in place standard operating procedures as well as everything needed to run the business.
Although the above list is very simplified, understanding each item on the list could take months to years. Of course, you may be doing some of these items together. It is still a long road from the original idea for your startup until the grand opening.
Even once you are open, you are not going to be turning a profit right away. In most cases, you will not see a tangible profit for multiple years. Buying a business takes less time to get up and running, and you will see a profit sooner in most cases.
13. Less Research Needed
When a business is already in place, you will not need to spend as much time researching everything. You will already know how everything works, and you do not need to spend as much time researching the market, different vendors, how different ideas and products will work, and so forth.
You should still do some of this research as most people want to buy someone else business, but they want to change it and make it their own. However, this means you can focus on one thing at a time and the projects that really mean the most to you. Also, as the business is already running successfully, you will have less on your plate to worry about!
14. Minimal Less Risk
There is less risk involved when you are buying an existing business than making a new one. You already know how much they spend versus how much money they make, so it is your job, in the beginning, to maintain those numbers and eventually improve them.
When what you have is a startup, you only have the research to go by. Startups are incredibly risky. Of course, the reward is also incredible. It is a business idea you came up with on your own, and all the success is due to your vision and how you ran the business. Unfortunately, most startup owners never get to that point.
15. Less Work
When you buy a business instead of starting your own, you will have less work overall. First of all, you will spend a considerable less amount of time working hard on planning every detail of your new business on the front end, as most of this is already done for you.
Once you start working on maintaining what has already been built or tweaking all the things you want to change, you will not feel as overworked. But, again, this is because you already have both a system and a staff in place, which will allow you to focus your energies on the things you really are interested in instead of every detail of the day-to-day operations.
16. So Much More Fun
Running a business, whether you created it from scratch or you bought it is hard work. However, when all the pieces are in place, and you are already making a profit, it can be so much more fun.
You will not have to work 18 hour days (although you may still choose to), you will not have to work for money as much. When some of the things that cause the most stress are removed, you will be able to have fun and enjoy your business.
You may like the following business articles:
- What makes a startup successful
- How Long Before Successful Tech Startups Start Making Money?
- How Do Successful Startups Outsource Customer Service?
Bottom Line In business, like this article, what is most important for most people is the bottom line. The bottom line here is that there are many reasons (at least 16 of them) to highly consider buying a business. Make sure you consider the advantages of buying an existing business when you are making your final decision between creating and buying.
Bijay is an entrepreneur and start-up founder having more than 14 years of IT industry experience. He is the co-founder of TSInfo Technologies, a SharePoint development company.
A dedicated professional and very passionate about public speaking and also wrote thousands of technical blogs in various technologies. He also wrote a lots of blogs on entrepreneurship, investment, startup, business, manage money tips, etc.