Pros and cons of buying an existing business

Purchasing an existing business is an option for Maryland residents who would like to become business owners. Before going ahead with the purchase of an existing business, however, it is important to consider the benefits and drawbacks of purchasing an established venture. Although there are many advantages of buying a business that has already gone through its startup phase, the disadvantages could give some potential buyers pause for thought.

The obvious advantage of purchasing an existing business is the fact that startup costs will be significantly reduced. An existing business may already have inventory, a trained staff and a loyal customer base. If the business is profitable, the new business owner might also gain immediate access to cash flow that can be used for any improvements they would like to make to the business.

In some cases, a downside of purchasing an existing business is the high cost. A business that is very successful may end up being sold for a price that is higher than an entrepreneur would pay to start his or her own company from scratch. If the cost of a pre-existing business is low, chances are the business may not be bringing in very much profit. Another downside to consider is the possibility that a business could be sold with hidden debts or other problems that have not been disclosed.

An attorney may be able to help someone who is considering buying a pre-existing small business to determine whether or not the transaction is advisable. If the person decides to go through with the purchase, an attorney may also help to review all aspects of the deal in order to ensure that there are no hidden issues that will result in unexpected expenses later.

Source: SBA, “Buying Existing Businesses“, September 19, 2014

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