How to buy an existing business

Buying an existing business can give you established customers, employees and income. However, you may also take on hidden costs, contracts and problems created by the previous owner.

Advantages of buying an existing business

• Some of the groundwork to get the business up and running will have been done.
• It may be easier to obtain finance as the business will have a proven track record.
• A market for the product or service will have already been demonstrated.
• There may be established customers, a reliable income, a reputation to capitalise and build on, and a useful network of contacts.
• A business plan and marketing method should already be in place.
• Existing employees should have experience you can draw on.
• Many of the problems will have been discovered and solved already.

Disadvantages of buying an existing business

• You often need to invest a large amount in advance, and will also have to budget for professional fees for solicitors, surveyors and accountants.
• You will probably also need several months' worth of working capital to support cashflow.
• If the business has been neglected you may need to invest more money on top of the purchase price to give it the best chance of success.
• You may need to honour or renegotiate any outstanding contracts the previous owner leaves in place.
• You also need to consider why the current owner is selling up and how this might affect the business.
• It's possible current staff may not be happy with a new boss, or the business might have been run badly and staff morale may be low.