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Advantages and Disadvantages of Buying An Existing Business

As it has in many areas of modern life, the Internet has been a game-changer for entrepreneurs looking to buy existing businesses. Portal websites such as Commercialview.com.au offer one-stop commercial property shopping, with all the prices and locations of businesses up for sale. Although due diligence is still needed before buying someone else’s enterprise and making it your own, these portal sites make the beginning of the process easier than it has ever been before.

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It’s easy to take the good…
Only you know how much you’re willing to invest in an existing business. Other than the asking price, however, there are other important factors that you will need to know about any place you are interested in buying and owning for yourself. Are there skilled existing employees that you might like to keep on? Keep an eye out for those individuals who can significantly reduce your hiring and training costs. Remember that experienced employees may be able to show you the ropes on some of the more common pitfalls and opportunities presented at their level.

Unless the business you’re looking to purchase is becoming insolvent due to lack of customers, another nice aspect of buying an existing commercial venture is that many people will already know about your business, meaning that a lot of the work of introducing yourself to a community doesn’t need to be done.

Finally, since there is already a customer base, you will most likely have immediate cash coming into the business. This means that less capital has to be squirreled away before opening shop. It also means that some of the capital you do have saved up may be used to expand that customer base.

But can you take the bad?
Unfortunately, there is a down side to almost every advantage in buying an existing business. For example, although inheriting existing employees may be helpful in important ways, in other ways, it may work counter to your plans. It’s easy for long-time staff to become jaded, bored or otherwise uninterested in your business now, except as a supplier of a pay-check. You will have to expend effort to weed out negative employees and cultivate positive ones.

As far as not needing to introduce yourself to customers, think about whether that’s really a positive thing. Did the former owner have a bad reputation in the community? It could be that location was the only thing that kept the business afloat, and that advantage can be lost in the time it takes a competitor to put out their shingle. Starting a good reputation from scratch may be easier than erasing customers’ memories of a bad reputation.

Not needing a lot of capital to open shop is a definite relief, but the fact that the space has been in use may mean heavier maintenance costs down the line. Depending on the type of operation you’ve purchased, machinery may need to be refurbished or replaced. For example, a bakery without its industrial-strength mixers isn’t going to be able to operate for very long. This is one area in which is it vitally important for prospective buyers of an existing commercial space to do some research, even if it means calling in an expert in the field to examine the physical plant before making an offer.

A leap of faith
No existing business is going to be perfect. Some time spent on a website portal such as Commercialview.com.au, however, can alert you to the prices and locations of commercial spaces for sale that may prove too good to ignore. That said, once you have your list of potential businesses to buy, you might want to stop in first as a customer. You may be able to get the shopkeeper talking in ways he wouldn’t talk to a possible buyer. There’s no need to be dishonest – just let the owner do most of the talking.

Ultimately, no matter how much information you gather and analyse, buying an existing commercial enterprise does take a leap of faith. How big that leap might be, however, does depend on what you’ve taken the time to learn.

 

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