Buying a Business

The advantages of buying an existing business over starting one certainly depends on the individual and their plan but some factors of buying an existing business do exist.

The first of which is an existing customer base and reputation or brand awareness. Theses are two facts that starting a completely new business, unless you are buying a national franchised chain; have over new businesses. However, the size of that customer base, along with how the brand or reputation is viewed in the community; is extremely important to know before buying.

Since the businesses doors are still open one could assume it has passed the start up phase of business in which many fail, but that fact should trigger the “Why is the business for sale?” question. This is a question every potential owner should have answered but not just by the seller. A buyer should investigate the question outside of just asking the seller; speaking with members of the community, banks, competitors and suppliers.

Some forms of business may not offer an alternative other than buying an existing business due to certain government or state regulations or the markets in which they exist. Also, if an entrepreneur has a truly unique idea no current business may exist to purchase.

There are two ways an individual can purchase a business; the first is as an ongoing operation. In this method the buyer simply acquires the existing business along with all of its tangible and intangible assets. When this type of purchase is made, the ongoing business operations do not change; unless the new owners make changes such as employees, signs, menus, suppliers etc. Usually this is done in cases when corporations are involved for sale; since corporations are separate entities not connected to its owners.

The other method is to purchase the assets of the company; which is normally the more preferable approach. When purchasing assets the buyer is protected from acquiring hidden or unknown liabilities; since the process allows for the disclosure of the assets the purchaser is buying on the bill of sale.

Purchase of an ongoing concern is best if some of the assets desired are not transferable; such as a franchise agreement. Also this approach may be required if the seller insists due to tax implications or if a company has hidden assets not yet realized or recognized by the current owners.