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The business idea - why not buy a business idea that already works?

Pros and cons of buying a business:

You don't actually have to launch a business from scratch - you can buy a company that is already established. We often hear that we're entering the golden era of buying companies because so many people born in the 1940's wants to retire and may have no natural successor in the family who wants to step forward and take over the company.

There are quite a few advantages, but also some disadvantages to buying a business. We’ll start with the up side:

Benefits of buying a business:

• You save time, energy and money when you buy an established business. It takes a long time to create a viable business and when everything is already fixed from the start, you have energy left to develop it and make the company better instead of fighting over crumbs in the beginning.

• It may be easier to find funding if you're buying a company that has already proven itself rather than starting something completely new.

• Everything is usually included in the price. There are great advantages of an established infrastructure. It's not just about ways to customers and suppliers, but also to employees, equipment and systems the previous owners have used.

• Dealer's are already established and just need to be developed.

• Customers already have confidence in the company.

• There are probably already premises available.

• The money comes in directly, rather than at some relatively uncertain point in the future as you must expect when you start something completely new. An established business that you buy has probably a natural influx of money and has already a line of steady customers.

• Even if a company is already established there is room for new ideas and creativity on your part. Therefore, it's good if you buy a business in an area where you can contribute with your own knowledge and make the company even stronger.

• The previous owner/owners can stay with you for a while and help you get accustomed to the company.

• You have an interesting item that, if you manage it well, may be worth more when you want to sell the company yourself some time in the future.

• You probably have a greater chance to succeed as an entrepreneur when you get involved with something that is already successful from the start. Many of the problems that crop up when you start out fresh are already detected and resolved.

• There is already a business plan and tested sales and marketing techniques, so you don't have to worry too much about testing such things out anew.

• There may be experienced employees that you can benefit from.

Disadvantages of buying a business:

• Money. You will need to pay a large sum of money to buy a company that is already established and you will also need to directly have money in the budget for the auditor and other features.

• If the company has been poorly managed, you may have to spend a lot of money in addition to what you bought company for.

• You will need to account for contracts and other commitments made by the previous owners before you can change things for the better.

• You need to consider why the current owner is selling and analyze the company thoroughly, not just accept whatever story he/she tells you.

• You need to consider the staff's feelings associated with the change of ownership, otherwise the morale may drop and the company may run into trouble. Staff can even leave the company when you come in as a new owner because they may be disappointed with something about the agreement you've made with the former owner or for other reasons.

• You may need to move and relocate your family (this can, of course, be an advantage too).

• You will need to analyze the market as much as if you are starting a new business by yourself. You need to look at competitors, the future and the present situation.

Finally ... Whatever decision you choose to make, it's important to hire someone who knows more about how companies are valued, someone familiar with the specific industry and who knows how to investigate past business events and write watertight contracts that will disclaim you from any surprises that the old owner decided not to tell you about.

About the author

Stefan Ekberg has worked in marketing for small business for 20 years and has written around 30 books on how small business owners can market themselves with limited resources. . In 2012 Stefan was nominated as Entrepreneur of the Year in Stockholm.

230 000 prescribes to his free newsletter "The 5 minute marketer"
Every week some 230,000 prescribers gets his free newsletter about 5 minute marketing.

"The 5 minute marketer" - the book
You run a small business and you want to get ahead of the competition, but how can you give resources to marketing when you're short on time and the budget is tight? The solution is here! The 5-Minute Marketer is packed with 395 tried-and-tested ways to market your business in 5 minutes or less.