Buying an Existing Business

by Kori Rodley Irons | More from this Blogger

21 May 2007 08:34 AM

Not every home business is created from scratch or from an individual's lone idea. Many people come to owning and operating a home-based business by way of purchasing an exiting business from someone else. Have you given much thought as to whether or not this might be the way to establish and grow a business that is best suited for your own needs?

The benefits of buying an existing business are that you already have contacts, a business model, and, hopefully, an operation that is already generating a steady income. This saves you the time and ambiguity it takes to build up a new business out of nothing. If you are purchasing the business from someone you know or who is willing to spend some time showing you the ropes, you also get extra training and support that you will not get when you are starting your own business from the very beginning.

Of course, purchasing an existing business can cost you more in start-up expense. You may need to find financing or come up with a fair amount of money up front just to purchase the business. And, there may be additional expenses to step into something that is already in operations. Whereas, starting a business of your own from scratch can mean that you can build and spend as you go instead of a large, initial investment. If the business you purchase is a franchise, there may be additional fees and annual payments that need to be paid in order to continue operating the franchise business.

Before purchasing an existing business, get as much information about the business as you can-look over profit and loss statements, and talk with customers. You may even want to have an objective person (an attorney, financial planner, tax consultant, business mentor, etc.) look over the business to see if you are missing some red flags and getting an accurate understanding of what will be required of you to step in and run the business. Also make sure that you make the purchase legally-using the necessary contracts and paperwork to ensure that everything is above board and the transfer is clean and complete. Even if you are purchasing a business from your best friend, make sure that you do things thoroughly and are well prepared for the challenges of stepping into an existing business operation!

See Also: Should You Turn Your Hobby Into a Business?

Can You Really Start a Home Business For Less Than a Latte?

The Downside of the Ground Floor

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