|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
- 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...
- Type, age, history of the business
- Function, specifications, prices of products or services
- Employees, organization description, team characteristics
- Market size, potential growth, market share, distribution
channels, relationships with customers, differences between competitors
- Potential competitors' barriers to entry, suppliers and their
characteristics, customers and their characteristics, industry trends
- Number of employees, work flow and management systems, quality
control, equipment, information systems, capacity
- Sales, gross margins, P/E ratios, bank loans, receivables,
- Book value, liquidation value
- Potential obstacles, potential value that you can add.