Buying An Business

Buying an existing business

The main advantage to buying a business is, in theory, that as soon as you have paid your money, you can start making money. This route is particularly well suited to people who have extensive experience of general business management but lack detailed technical or product knowledge.

When you buy an established profitable business, you will not only pay for the basic assets of the business, but also the accumulated time and effort that the previous owners spent growing the business to its present state. This extra asset is called the 'goodwill' of the business. The better the business, the more the 'goodwill' will cost you.

Advantages and disadvantages.

• You will buy some of the experience and expertise you do not have. Nobody can be expected to know how to do everything. It is much easier (and cheaper!) to learn from other people's mistakes that they have made in the past, rather than making all these mistakes again yourself.

• If your new idea needs to be marketed to a specific target customer, buying a business dealing in related goods or services will give you both access to your potential customers and the credibility of a trading history, when you seek to launch your new product.

• Buying an existing business can be a way of gaining access to your chosen market, if that market has barriers to entry that would be too difficult or costly for a 'start-up' to overcome.

• Identifying the right potential acquisition and negotiating purchase can take a very long time, especially if you don't succeed at your first attempt.

• The professional fees associated with buying a business can be very significant. Good solicitors and accountants are a necessary evil in this process. They will ensure that you know exactly what you are buying.