If you are buying a business...
Instead of starting from scratch, you see an opportunity to move into an existing business in a different direction.
Advantages of buying a business
  • You don't have to spend all your time trying to start a business from scratch;
  • You may not have to spend so much money on an existing business
  • An existing business has all the attributes in place that you would spend months or years developing if you started from scratch. Examples - inventory, suppliers, contracts and licences, goodwill market share, credit facilities, and management systems.

Disadvantages of buying a business:

  • No fun. For many entrepreneurs, most of the fun comes from building a business piece by piece.
  • Misguided attributes and systems. Business characteristics that are not what you would have chosen/done for your own business.
  • Unforeseen restrictions. You might have more trouble changing the strategic direction of a business you buy than a business you start from scratch. It might be locked into sales agreements, contracts with suppliers, employment contracts, or other types of binding agreements that can't be altered without a lot of trouble.
Things to consider if you're buying a business...
  1. Type, age, history of the business
  2. Function, specifications, prices of products or services
  3. Employees, organization description, team characteristics
  4. Market size, potential growth, market share, distribution channels, relationships with customers, differences between competitors
  5. Potential competitors' barriers to entry, suppliers and their characteristics, customers and their characteristics, industry trends
  6. Number of employees, work flow and management systems, quality control, equipment, information systems, capacity
  7. Sales, gross margins, P/E ratios, bank loans, receivables, payables, assets
  8. Book value, liquidation value
  9. Potential obstacles, potential value that you can add.
Disclaimer: This website contains the opinions and ideas of its authors and is designed to provide useful advice in regard to the subject matter covered. The author and publisher are not engaged in rendering legal, accounting, or other professional services in this website. This website is not intended to provide a basis for action in particular circumstances without consideration by a competent professional. The authors and publisher expressly disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this website.