The Benefits of Buying a Business Over Starting One

by Alex Izsak 8th of September, 2022

The Benefits of Buying a Business Over Starting One

As an aspiring business owner, you have two options laid out in front of you. The first is to build your business from scratch, laying out everything you need like purchasing all the stock as well as plant and equipment you need, hiring staff members, establishing suppliers, engaging in marketing efforts to attract customers and negotiating a lease agreement among others.

The second is buying a business. While starting a business requires a lot of work, purchasing one does not because almost all the work has already been done by the vendor. Notwithstanding this, buying a business still requires perusing all details presented to you by the vendor with help from your solicitor and accountant.

6 Benefits of Buying a Business

1. Established Brand

An existing business is more often than not already an established brand in the market in which it operates. It has a proven business model that has enabled it to exist, offer a return to its current owner and make it attractive enough for you as the purchaser. An established business enables aspiring entrepreneurs to skip the pain points and learning curves associated with starting one from the ground up. It also does not have a ramp-up period or unanticipated startup costs because you can simply take the existing model and run with its well-developed operational procedures.

2. Existing Customer Base

A business for sale already has an existing customer base if it has been trading for a significant amount of time. Having an existing base of loyal customers is extremely beneficial to lowering marketing costs through repeat purchases as well as providing steady cash flow. A steady revenue stream can enable the owner to have the capital necessary to make improvements and upgrades that could potentially increase profit potential. A new owner could further leverage existing customers by requesting pointers for improvement to invigorate the business and add a fresh perspective that the vendor had not put in place.

3. Well-built Supply Chain

Aside from an existing customer base, a business for sale has already established one of the key aspects to operational success–a well-built supply chain. Suppliers are not only important for providing stock and capital equipment to an existing business operation. It also serves as an important network of business contacts that a business owner may tap to gather information about the market.

4. Infrastructure Already in Place

An existing business already has all the infrastructure it needs not only to operate but also to thrive. It may already occupy an ideal commercial location with an excellent lease agreement in place. The business may also have all the existing plant and equipment necessary for continued operations, so the purchaser need not make additional investments.

Established systems and processes enable good continuity of operations, so the business operates seamlessly during the transition period. An existing business will also have a well-curated online presence, such as a website and social media that help it attract customers on the internet.

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5. Immediate Access to Trained Staff

One of the challenges facing businesses globally is the shortage of skilled staff members that are crucial to successful operations. When you are starting a business, one of the tedious processes you will have to undergo is screening countless applicants to find staff members that fit your organisation. Then, you will have to train them so they have the necessary skills for your operations.

However, when buying a business, you get immediate access to trained staff that are already knowledgeable of the systems and processes in operations. Long-time staff who remain with the business can also provide valuable information and an outlook on what has been beneficial to the business throughout its existence. Moreover, existing customers will be familiar with old staff, enabling good business continuity.

6. Greater Likelihood of Success

The Lindy Effect is the idea that the older something is, the longer it will likely be around in the future. This theory has been confirmed for many things, such as technology, ideas and businesses.

If a business has weathered the first few years of its existence, then chances are that it will continue to be successful. Buying a business that is already successful enhances entrepreneurs’ chances of success compared to an untested startup. After all, its main product or service is already market-tested and is, more often than not, backed up by financials.

Conclusion

Before buying a business, familiarise yourself with all the steps necessary in the sale process. Being prepared and informed through due diligence will enable you to see the business for what it truly is and not fall into the trap of buying a business that is performing poorly. The following are the steps towards completing your business purchase (Business Victoria):