Is buying an existing business risky?

by | Sep 20, 2023 | Blog, Sales, YBL Blogs

If you’re considering buying an existing business and want to know if it’s a risky endeavour, you’ve come to the right place for answers.

The short answer is: Buying an existing business is typically lower risk than starting a brand new business.

Let’s look at why.

1. Brand reputation

You can significantly benefit if the business you intend to buy has a solid positive history of operations and financial performance with a robust customer base. An existing business’s record gives you valuable insights into its viability and potential for success. Not having to build brand awareness from scratch will save you a great deal of time and effort, and inheriting its customers provides instant revenue opportunities.An existing business often generates cash flow from day one, which can help cover operating expenses, loan payments, and other financial commitments.

2. Operational processes

Mature businesses have developed operational processes, vendor relationships, and supply chains. This can reduce your learning curve, streamline workflows and increase efficiency from the beginning. Well-defined processes also often come with built-in quality control mechanisms to minimise mistakes and errors and mistakes, which can promote consistent outputs and high customer satisfaction. Inheriting experienced staff means they’ll work productively and positively contribute to your business’s success.

Tip: Make sure you assess these processes critically during your due diligence. While established processes can be advantageous, there might also be opportunities for optimisation and improvement.

3. Better financing opportunities

Established businesses with a proven track record can often be more attractive to lenders and investors which potentially makes it easier for you to secure financing. A clear picture of the business’s financial health can make lenders more comfortable with extending credit. This proven track record lends credibility to your business plans and projections. Moreover, investors looking for businesses with solid credit history might be more inclined to consider equity investments, which can bring in capital for growth while also leveraging the investor’s industry expertise.

Also see: Can I buy a business with no money?

4. Reduces time-to-value

Launching a new business can take significant time for market research, product development, and setup. Buying an existing business allows you to jumpstart operations and see value quickly. If the business offers products or services, these are already developed and tested – eliminating time spent in the early stages creating and refining offerings. In terms of regulatory compliance, an existing business likely has necessary licenses, permits, and regulatory approvals in place – saving you the time it would take to navigate these processes.

5. Customer loyalty

Buying a business with a customer base in place means you’re stepping into a relationship that the business has built over time. Existing customers have already experienced the products or services and have a level of trust with the brand. This loyalty can translate into ongoing revenue and repeat business, as well as potential word-of-mouth referrals. Moreover, having a loyal customer base provides a solid foundation for introducing new offerings or expanding the business’s reach.

6. Competitive market position

An existing business is likely to have a strong footing in its industry and a known position among competitors. This established presence can provide a competitive advantage over starting from scratch. You can leverage the business’s market position to negotiate better terms with suppliers, attract top talent, and collaborate with partners more effectively. Additionally, a business with a recognisable brand and market presence can more easily adapt to industry changes and capitalise on emerging opportunities.

So – is buying an existing business risky?

Buying any business will always come with some risks. However, the decision to buy an existing business aligns with compelling reasons and offers you a markedly less risky path compared to starting a new enterprise. By leveraging an established brand, operational efficiency, enhanced financing prospects, and a faster journey to value, you position yourself for a potentially more assured and efficient business venture.

It’s vital to seek legal advice and conduct thorough due diligence when you’re consider purchasing any business – existing or otherwise.

Get in touch for professional advice on buying a business today.

Steven Mather

Steven Mather

Solicitor

Hello, I’m Steven Mather, Solicitor – thanks for reading this blog I hope you found it useful.

As you’ll see from my site here, I’m an expert business law solicitor (sometimes called a corporate solicitor, commercial solicitor, company solicitor, but they’re all about advising businesses).

If you’re looking for Remarkablaw advice – fixed fees, great service, and a smile, then get in touch with me today.

Contact Me Today

× Live Chat via Whatsapp
chatsimple