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Buying an Existing Business

Should you start a business from scratch or buy an existing business? Buying an existing business might be a good option for many.

Buying an existing business has many advantages. There is the advantage of immediately obtaining a customer base and market. The business is already up and running and the market and brand image has already been established, saving the buyer a lot of time and money. Also, financing is usually easier to obtain for a business with a proven track record.

The biggest advantage of buying an existing business is financial. With an existing business, you usually have immediate cash flow. Also, the company is likely to be profitable when buying a business. When you start a business from scratch, profitability and cash flow may take quite some time to achieve, if at all.

However, when buying a business, it is important to understand why the owner is selling and how it might affect the buyer. If the business has been neglected, it may cost quite a bit more money to have a good chance of success. Also, the business may have outstanding debts that may become a liability to the new owner. This is why choosing the right buying terms can be very important.

Ways to Buy a Business There are two ways one can buy an existing business. You can either purchase the company's assets or purchase the company's stock. Of these two, purchasing the company's assets is preferable.

Purchasing Stock Stock acquisitions involve buying the stock from all the company stockholders. Purchasing the outstanding company's stock can leave the new owner liable for any debts the company may owe. If you buy the stock of a company, the liabilities of the company become your liabilities.

Purchasing assets The second way to buy a business is to purchase the assets of a company. This includes tangible and intangible assets. Some intangible assets you may purchase can include the company name, customer lists, patents, trademarks and contracts. The best thing about this option is you can pick and choose which assets you wish to purchase. Only want the company name and trademark? You can choose to only purchase those assets. There may also be tax advantages for the buyer purchasing a company's assets.

Purchasing an existing business can be a great opportunity for entrepreneurs looking to minimize risk. There are many advantages to purchasing an existing business. But, before you purchase a company, it is important to understand the different ways you can purchase an existing business and which one is best for you.

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