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Buying a business

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Last updated on October 24, 2016

If you're thinking of buying an established business, there are some important things to consider.

Advantages of buying an established business include that:
  • a proven track record lessens risks, increases the likelihood of success, and may make finance easier to obtain
  • immediate income is available from sales to the existing customer base
  • the business is in a proven location
  • stock is already in place and suppliers are established
  • equipment already exists and its capabilities are known
  • present employees may provide valuable assistance
  • the previous owner may provide experience and, possibly, finance.

Disadvantages of buying an established business include that:
  • it’s hard to assess goodwill
  • there’s a chance you could be misled and end up with a ‘lemon’
  • you may inherit a poor public image
  • the loss of the previous owner’s relationship with customers may affect sales
  • the existing location may not be adequate
  • there may be problems in the relationship with the landlord
  • stock and equipment may be out-of-date, damaged or out-dated
  • employees may be unsuitable or poorly trained
  • it may be difficult for you to introduce change
  • unexpected expenses may arise if the business is run down.

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