The Advantages of Buying an Existing Business

Jun 25, 2010

Most people who are considering buying an existing business will search the businesses for sale listings first.  After all, the allure of instant cash flow, an established brand, and an existing customer base sounds like a lot more fun than starting a business from scratch.  Established businesses are usually a much more attractive option for first-time entrepreneurs, but buyers need to learn how to analyze and evaluate buying an existing business before signing the dotted line.

So, you found a business you like in an online businesses FSBO directory.  Before you get too excited about the potential of an existing business, let’s examine some of the common advantages of buying an existing business.  In many cases, these could also be disadvantages. 


Brand Awareness: As a potential buyer, it can be very difficult to determine how a brand is perceived by its customers and how good, or bad, their reputation is.  Even if their recent numbers look good, a business could have recently had a negative event that will affect the business in the future.

Existing Customers: While this may seem like a very attractive element to a potential buyer, how many of those customers will stay with the company after it is sold?  Some may leave because of their relationship with the prior owner, and others may simply use the sale of the business as an excuse to shop around. 

Cash Flow: The cash flow of a business is only as good as its reputation and its customer base.  Just because an existing owner had a certain standard of living from this business does not mean that you will, at least not right away.  In fact, the decrease could be substantial. 

Careful evaluation and due diligence must be done in order to make the right decision about an existing business.  Dealing directly with the business owner, rather than a broker, will ensure you are getting the most accurate and up-to-date information about the business.  For a complete listing of businesses for sale, consult the businesses FSBO directory.