Investing in a business is a major decision — and there can be many advantages to acquiring an existing company rather than starting your own. If you’re planning to buy a business, it’s important to know why you’re buying. Are you a financial buyer, an investor, a strategic buyer, or a show-runner? Consider many factors before entering into this transaction, and to know what your goals are.
Reasons to Buy an Existing Business
Buying an existing business comes with a much lower risk than building a new company from the ground up. Acquiring a company allows you to evaluate the business’s competitive position, operational systems, and financial health — as well as its suppliers and customer base. Other reasons to buy an existing business can include:
- Established customer base — When a business has an established customer base, the risk of failure is reduced.
- A proven track record — A successful track record can ensure you have access to instant cash flow, so you generate revenue immediately. You will probably also have an easier time obtaining financing than you would for a start-up.
- Financial history — Having a financial history on the business can give you a good idea of the company’s financial stability, debt levels, and profitability. This can give you a sign of the revenue the company will be likely to generate.
- Experienced employees — An existing business will already have a workforce in place. Employees will be familiar with their positions and the company’s operations, negating the need for extensive training.
- Established reputation — A significant advantage that comes with buying a business is the established reputation that comes with it. While building a brand identity and market awareness can take a long amount of time, an acquisition will already have recognition and customer loyalty you can capitalize upon.
- Relationships with suppliers — An existing business will have established a relationship with suppliers, vendors, and business partners, allowing for a smooth transition.
These benefits often outweigh the risks of buying a business, versus starting a business from scratch. This is why it’s essential to conduct due diligence. This process can give you a detailed analysis of the company, its operations, and its financial state, so you can make an informed decision before buying it.
Other Factors to Consider When Buying a Business
Apart from the legal and logistical considerations when buying a business, various other factors can come into play. For example, is the timing right for you? Is the industry and the business a good fit for you? How involved do you want to be in managing the business? Buying a business is an opportunity for both personal and financial growth — and it’s vital that the acquisition aligns with your goals.
Ultimately, one of the most important things to consider is whether the business meets your goals. No matter how profitable the company is, if you are not interested in the company or enthusiastic about the industry, it is less likely you will succeed. A business is an ever-evolving investment you should enjoy interacting with. It is your passion for the company that will help fuel its growth and increase its profit margin.
Contact an Experienced New York Business Attorney
Purchasing an existing business can be rewarding and challenging. It’s critical to have the guidance of a skillful business attorney by your side who can advise you every step of the way. Offering knowledgeable counsel and high-quality representation, Brinen & Associates assists clients with a wide variety of business matters, including those involving acquisitions. Call (212) 330-8151 or send us a message to learn more about how we can assist you.