Richard Parker
August 9, 2020
Assignment 7
Building your own business is lots of hard work. That is why many entrepreneurs choose
to buy an existing business rather than starting from scratch. Opening a new business, during
this time, with everything going on in the world, death knocking at your back door, people afraid
to spend money, consumers are holding on to every dime they come across. Every other day
another small business must close their doors, because consumers are not going out to spend,
they are looking for ways to try to keep their business from closing. They are trying to find ways
to keep their employees working and the doors to their small business open.
Now lets look at some advantages and disadvantages of going into business with an
existing, already established, their brand is already established and trademarked, all I have to do
is to put in my half of the money they are asking for, then after a few papers have been signed,
money has been given, checks all have cleared, then my business is about to be opened.
There are several advantages to buying an existing business as opposed to starting your
own. Most obviously, you save time. Suppose you want to start a retail business. It may take
months for you to build an adequate inventory. Opening your own restaurant means creating
your own recipes and menus; building a manufacturing business from scratch can take years. But
when you purchase an existing business, the "dirty work" has already been done.
If the business you want to buy offers a product or a service, you can evaluate the
operating history and better understand the demonstrated market. Are people buying the product
or service? What are they willing to pay? What type of advertising has been most effective?
When you start your own business, it can take many years of trial and error to establish your
market. Purchasing a business can alleviate this process.
Buying into an existing business will allow you to evaluate its cash flow and operating
expenses, giving you a better idea of how much investment capital you will need. When you start
your own business, these numbers are much more difficult to estimate, and investors consider
start-up businesses higher risk than existing ones with operating histories and proven trackrecords.
Perhaps the biggest advantage to buying over starting a business is the existing business's
potential. You may see growth opportunities the current owner does not, or maybe you have a
superior business plan. Your enthusiasm and excitement for the business can revive it and help it
to grow, and often relatively minor changes in advertising, personnel, or procedure can greatly
improve profitability.
But, now, there is downside to buying into a business that is already established:
Of course, there are disadvantages to buying a business, and you must weigh them
seriously against the advantages. For example, unless you plan to replace all the existing staff,
you will have employees working for you whom you did not hire and whom you do not know.
They may be resistant to the changes that you make. You may find it difficult to motivate
employees who have become complacent under the old management or that there are personality
conflicts between new and existing employees.
Evaluating the current operations of any business can be a daunting task, and when you
consider buying you must do this thoroughly and with diligence. Heath inspections, building
inspections, financial analysis - the list goes on, and you must be prepared to do it all before you
sign the dotted line. This can become costly, especially if you are comparison-shopping.
Remember, the seller may try to downplay any business problems. He or she may not be
honest about operating cost or profits, and there is the possibility that the "books are cooked."
That is why you must have a capable financial expert explore all records thoroughly.
Additionally, make sure you understand the current customer base. Financial records indicate
only the number of sales or clients, not the level of customer satisfaction. What if you inherit a
dissatisfied customer base? Or, conversely, what if the customer base purchases the product or
uses the service simply because they have a relationship with the current owner? This problem
can present itself particularly if the business you purchase is a family business, a small-town
business, or in many cases, both.
Now, I have given you information to make your own decisions on. Investigate more, do
not go on what I have found out. Find your own, this is a serious discussion you must make, its
your future, its your money, it up to you. Pray ask God for directions. Then ask the Bank for the
money.