There are significant advantages in purchasing an already existing business rather than starting your own business. A business that has been operational and successful for some period of time offers reliable cash flow, established customers, and a network of employees and suppliers. Thus, an acquisition of an existing business can eliminate many of the risks associated with a startup venture, particularly the risks associated with obtaining financing for a business with an unknown track record.
Financing the business. It can be difficult to obtain adequate financing for a new business, especially one that may be risky in nature. A prospective entrepreneur might have to consider non-traditional financing methods in many cases, which present increased costs and may be deemed too risky. In contrast, an existing business can produce cash flow statements and other financial data that simplifies the process of qualifying for a loan from a traditional lending institution. When the business is financially sound, the prospective purchaser may have a variety of attractive financing options from which to choose. In addition, the purchaser may have more accurate financial projections for the future of the business in light of historical data and other records that the business can provide.
Operating the business. Much of the risk associated with a new business concerns how the business will operate. This may include several important factors such as choosing competent employees, establishing reliable vendor and supplier relationships and delivering a quality product or service. The profitability of the existing business will indicate how successfully the business is managed. In addition, the business will likely have acquired a customer base, which will mean less time advertising and marketing to customers.
Looking to the future. When you purchase an existing business, you can focus your efforts on building a better brand and/or expanding your venture. With a strong foundation already established, the business owner can also allocate funds to ventures within the business that might entail some additional risk. In addition, with an adequate understanding of income projections, the owner can more readily and accurately make future projections and long range decisions regarding the direction of the business.
Contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com to find out more about his practice.