Have you ever wondered if you should buy an existing business or start a new one? It is important to thoroughly weigh your business goals, market opportunities before making
an acquisition and evaluate your risk tolerance beforehand.
This being said, here is a list of “pros” and “cons” of buying a business:
1. Track record: Buying a business gives you an established customer base, an experienced team, an operation mode and a business plan.
2. Financing: The assets of the company you are buying, either inventory, equipment, building, etc. can be used to help secure your financing needed for the purchase.
3. Income: The business already has existing sales and maybe even profits. It takes time for a new company to become profitable.
4. Market knowledge: Acquisition may be a good strategy if you want to expand into a geographic location where you lack contacts and knowledge and/or a new industry.
5. Vendor assistance: Existing owners often help finance the purchase of their business by providing financing.
1. Poor fit: It can be difficult to find an existing business that is compatible with your culture and business goals.
2. Integration challenges: Integrating a new company into your existing operations can be harder than expected. Expected payoffs often don’t materialize as quickly as planned.
3. Vision conflict: It may be harder to impose your vision on a company that already has its own culture and history.
4. Dependence on the old guard: A rocky ownership change can prompt key staff to leave and imperil customer relationships.
Whatever your decision, the project will have a greater chance of succeeding if you have a clear, detailed understanding of why you are proceeding and how the venture will meet your business goals.
Mr. Benoit Brunette,
Centre Entrepreneurship Centre Prescott-Russell,
613-675-4661, ext. 8106
This article was submitted and sponsored by Centre Entrepreneurship Centre Prescott-Russell.
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