We work with a broad range of clients who are either looking to start a new business or purchase an existing business or franchise in the United States. There are pros and cons to doing both and we are here to guide you in determining which is the best option for you.
Tips for buying a small business
- Be certain you’ll make a profit
- Invest in a strong brand or image
- Secure working capital & back-up resources
- Create a sound business plan
- Thoroughly examine the business before purchasing
Many people find the idea of starting a new business appealing, but lose their motivation after dealing with a multitude of different issues associated with a start-up. Quiet often buying an existing business is a simpler and safer alternative.
Here are some of the advantages
The main reason to buy an existing business is the drastic reduction in startup costs of time, money, and energy. In addition, cash flow will typically start happening almost immediately the day you purchase the business thanks to existing inventory and receivables. Other benefits include an existing customer base, brand recognition, and the ability to grow the business off of its previous track record of success. When trying to secure additional customers to increase your revenue, it is easier to do so with a business that has been in existence for a while than one which has just been started.
Here are some of the possible disadvantages
When buying a business you will most likely have to come up a large sum of money to buy the business outright. Since the business concept, customer base, brand recognition, and other fundamental work has been done, the financial costs to acquire an existing business is usually greater than if you were starting one from scratch. Other potential problems could include hidden issues associated with the business that you may have been previously unaware of. For example the accounts receivables of the business valued at the time you went to contract may not be the same as when you actually close on the business, and some receivables may not be collectable at all. Of course, good research on the front end and during the due diligence period is a key factor to avoiding these kinds of problems.
Do your research before purchasing
Once you have found a business that you would like to buy, it is important to conduct a hard, objective investigation. Look into every aspect of the business, verifying whether the owner’s stated reasons for selling are legitimate; double check every detail for accuracy.
A good business broker representing your interests in the transaction is highly recommended. They can offer you lots of advice throughout the process, make sure you receive the documentation needed to conduct proper due diligence, and generally look out for your best interests as a buyer.