Top 7 Advantages of Buying an Existing Business for Sale

Buying an existing business for sale can be seen as a leap into the dark and many enterprising individuals think twice before proceeding. Those who...

  • Top 7 Advantages of Buying an Existing Business for Sale
    Manish Khanna Image Manish Khanna

    Top 7 Advantages of Buying an Existing Business for Sale

    Buying an existing business for sale can be seen as a leap into the dark and many enterprising individuals think twice before proceeding. Those who have never been involved in this kind of dealing before can be very challenged by the process. It is, after all, not like buying a house or a vehicle where we can see a tangible product and "what you see is what you get." Business valuations can be composed of so many different intangible aspects and when goodwill comes into the equation, this is additionally difficult. Bear in mind that in a service related business, such goodwill and especially a strong client list can be critical, although when conducting due diligence many other areas or documents must be explored.

    Always remember that there are two different viewpoints here.

    The seller will have a clear indication of the worth that he or she places on the business. This may often be inflated by a natural enthusiasm and the sheer amount of hard work and dedication that may have been put into the business to this point. While you should always maintain an element of respect for the seller's point of view, you must look at all documentation and evidence in the hard light of day and understand that it is up to you to determine if you should buy business interests according to the specific value for you alone.

    When you decide that you want to move forward and investigate whether to buy a business of interest, understand that this may be a lengthy process. During the entire process you must maintain a level of common sense and good humor and be prepared to cultivate a strong level of communication with the seller.

    There are a number of advantages you'll find by venturing into an existing business. Here we'll discuss the merits of buying business for sale and franchises for sale.

    After reviewing all the possibilities, if you have decided to buy an existing business, then you have made a wise decision. This is because while starting an altogether new business, there are several challenges that need to be faced with a lot of research. The first challenge is to develop a product that boasts of high quality and is made available to the people at affordable prices. The other challenge is to find buyers for your product. Both the tasks involve great amount of risks and if you want to eliminate these risks, you can consider an existing business for sale. It will offer you a number of advantages such as that the product is already being sold in the market and you just have to take the demand and supply in factors into consideration before starting the production of the goods. You need not find buyers because a customer base already exists. You just have to make sure that there the existing customers remain loyal to your product by providing them the same, if not better, quality of goods. The real challenge for you is to expand the customer base by introducing new business strategies and improving the quality of your product.

    It is noteworthy here that while buying an existing business, you already have the resources and infrastructure. The term 'infrastructure' refers not only to the tangible assets such as business equipment, suppliers or customers, but also refers to an intangible asset such as goodwill. You can take advantage of the goodwill that a business enjoys in the market. The goodwill here can be particularly also referred to a franchise. A franchise is a brand name which is popular among a large section of people. If you want to grow under the shelter of brand name -a franchise, then your risks are bound to reduce. An infrastructure will already be in place, it is just that you have to ensure that the revenue is consistent and ensure that it continues to be a profitable venture.

    In short there are 7 advantages to buying an existing business-

    1) EXISTING CUSTOMERS

    Most clients or customers are loyal to locations and businesses. A transition period and similar measures can ensure that the customer base remains after the owner is gone. Finding clients for a new business is expensive and time consuming. But a new buyer can often benefit from even an old customer list supplied by the seller. One buyer reports that his seller's list was so well kept that he easily built a prospect database to contact existing clients.

    2) SEASONED EMPLOYEES

    Experienced employees are an important benefit when acquiring an existing business. They already know how the business works, so they can be a key asset if they are included by the old and new owners at the proper time during acquisition. Both sellers and buyers recognize they represent a valuable part of the business, which is why buyers often meet with employees when the sale is pending.

    3) MARKET PLACEMENT DEFINED

    A going concern is already positioned within the market through its current services or products. Purchasing an existing firm bypasses the risk new companies face in having to properly establish market position, prices, product design and other variables.

    4) SYSTEMS IN PLACE

    A new business has to install a number of systems - for payroll, sales, taxes, inventory, etc. - then train employees to use them. With an established business, business operating systems are already in place, and employees and customers are used to them. These systems may require improvements, but they can be implemented over time as needed.

    5) FINANCE FLEXIBILITY

    It's no secret in the business world that the preceding four advantages mean buying an existing business is less risky than starting from scratch. Thus, a buyer has a broader range of financing options - and usually at better terms. Bankers, sellers and sometimes suppliers are more willing to offer better terms - including lower interest rates and less collateral requirements.

    6) EARLIER CASH FLOW

    The buyer of an existing business often has cash flow from his first day of operations, where the new business often faces cash flow challenges for several years. Poor cash flow is the reason most new firms fail. For a purchased company, ensuring a reasonable cash flow is often a major priority for the financing partners and is "built into" the purchase agreement.

    7) LESS BUSINESS RISK

    As the prior points illustrate, there is simply less risk of failure when purchasing a going concern - even when major changes are required.

    Thus, there if you are now familiar with the several advantages that an existing business for sale offers, you just need to search on business listing websites to grab that perfect opportunity for yourself. Whether, it is gas station for sale or a restaurant for sale, make sure that you have the ability to take the business to altogether new heights by taking advantage of the existing favorable factors of an existing business for sale.

  • Author Info Manish Khanna

    Manish is founder of Business2sell Group of Websites. 

    Business2Sell.com.au is one of the leading business and franchise for sale listing websites. We work with our business brokers, commercial agents, franchisors and private sellers to help them connect with the right buyers for their opportunities. 

    With website now functional in Australia, United States, United Kingdom, Canada, New Zealand and South Africa. We have over 18,000 businesses for sale listed, with over 220 Business Broker and Commercial Agent. 

    I have over 20 years of experience in Web Industry; I have been involved in websites industry since the early years of 1996-97. In my professional career I may have worked for over 10,000+ websites. My Specialty is to build portals or complex online applications.