Pros And Cons Of Buying An Existing Business

With many existing businesses advertised daily in Botswana, one can quickly get enticed and invest money by buying that business. Buying a business is an alternative way to get into business with less risk than normally associated with a start-up venture. But there are still many factors you have to consider before signing on the dotted line.

Advantages Of Buying An Existing Business

There are specific advantages in acquiring a business rather than starting you own especially for the less experienced or newcomers. They are:

• A successful business should offer a lower risk than a start-up business
• At least the seller has some history and a track record to base projections on. In addition, the location may be good and alternative locations may be unavailable, expensive or risky
• A new business requires times to establish, often resulting in an initial trading loss. The possibility exists that an established, successful business can generate profit immediately or within a relatively short time
• An existing business often has established suppliers, whereas setting up a new business involves a trial and error process in selecting prospective suppliers
• A buyer often inherits a trained staff compliment and an existing client base

Disadvantages Of A Take-Over

• There is often a direct correlation between the success of the business and the owner. In other words, a business is often reliant on the flair and personality of the owner
• The new owner may inherit a workforce with entrenched attitudes towards their responsibilities. It could take time and money for them to adopt new policies
• Old equipment may result in production delays. Repairs to or the replacement of assets could put a severe strain on the cash flow
• Due to a lack of experience, the buyer may end up with dead stock, investing fresh money into old inventory
• A buyer may pay too much for the business. Often goodwill is valued unrealistically high which results in lower profits and returns on investments