Benefits of acquiring other businesses

If you’re looking impartially and unemotionally at the options ahead when starting your own business, you have to admit buying one already in operation is very appealing. Not only do you get experienced staff and an existing customer base, you also get established premises, a well-known brand and a network of suppliers.

Skipping the start-up stage

Within a few years of starting up, the majority of small businesses have closed for one reason or another, which means buying a well-established business should give the buyer some assurance they’re buying an already tried and tested business model that works.

Plus, when you buy a business as a going concern you don’t have to deal with start-up paper work, such as registering for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS) and meeting any state-level requirements for new businesses.

Other advantages include the following.

  • Existing businesses that survive and prosper typically perfect their operations over time, meaning you should inherit a well-oiled machine with all its processes streamlined and backed up with documentation so you can hit the ground running in a short period of time.
  • Existing staff can provide you with insight into how the business operates and how it could be improved. Staff normally find it easier to speak to a new boss and they may jump at the opportunity to start afresh with an owner who has every reason to listen.
  • Another bonus of inheriting staff is that you don’t need to recruit and train new staff. You’ll save time, money and energy that can be focused elsewhere in the business.

It’s important to identify early if there are any staff morale issues that need addressing, or if staff are resistant to new ownership and the changes this might bring. Talk to your staff and find out if they’re happy in their roles, if there’s anything that would help them do their jobs better, and what concerns they might have about a new owner coming in.

Showing staff you’re interested in them and open to discussion should help to ease any worries they may have, particularly if they have strong loyalty to the previous owner.

Inheriting systems, customers and image

A good business should come with tried and tested processes that allow daily, weekly, monthly, and annual tasks to be carried out as efficiently as possible.

For example:

  • A tourism business should have a simple booking system that includes all the product options.
  • Accommodation businesses should have a housekeeping system that has the premises fresh and sparkling in time for new arrivals and allows necessary repairs or maintenance to be recorded and carried out quickly.

You’ll save time, money and energy by not having to develop these systems yourself. You’ll also be able to improve the systems if needed, with the ground work having already been done for you.

A major advantage of buying an existing business is that you inherit its market, or customer base – particularly if you buy a franchise or well-known company.

  • This means you don’t need to pour as many hours and dollars into marketing and advertising as you would with a new business.
  • You can use the business’s existing brand recognition and image to reassure customers what they like about the business won’t change. For example, if you bought a popular inner-city café that catered to office workers putting in long hours, you might use a street-front blackboard to declare, “Under new management, still open from 7am, still staffed by award-winning baristas serving organic coffee”.

Along with a recognized brand and business image, you’ll also inherit a good reputation. This is a key point to be aware of when thinking about buying an existing business. If a business has a history of poor service or selling second-rate products, it might be difficult to convince customers that things will change under your ownership.

Buying peace of mind

While buying an existing business usually involves a greater initial financial outlay than starting a small business and growing it gradually, there are some peace of mind advantages that come with it.

  • An existing business will likely have long-term contracts with both suppliers and customers locked in. Knowing you’re gaining established relationships, purchasing proven products and will have regular business coming in each month, gives you peace of mind and frees you up to focus on growth.
  • By inheriting the previous owner’s business plan you’ll have a clear goal and path mapped out, giving a sense of direction and organization. This doesn’t mean the business plan is set in stone but it gives you a foundation to build on.
  • A good financial record is almost as important as good sales. If you ever need to apply for credit from new suppliers, having a strong financial track record usually means this will be granted easily. Without the backing of good results and records you'll need to find other ways to prove your creditworthiness. You might not get the credit you need.

All up, there are many advantages to buying an existing business if you can find one well-priced that interests you. It’s always important to be sure the business you’re considering is right for you, and to learn as much as possible about its financial status, history, value, strengths and weaknesses before committing to purchase.

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