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Factors To Consider Before Buying an Established Business
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Factors to Consider Before Buying an Established Business


It is pretty understandable why somebody would want to buy a business. Even buying a franchise could be a good option that yields similar benefits. See, it feels like you just skipped over the most challenging steps and instantly got to the sweet spot. Maybe you want to run your own business but don’t have that initial pang of inspiration or necessary market knowledge. Perhaps you’re just risk-averse and don’t want to invest time and money into something that could fail. There are many reasons why not starting from the ground up could make sense in terms of shredded nerves and financial calculations. Still, it cannot be that simple. Not all businesses are worth purchasing, and almost all businesses should be analyzed thoroughly before a decision is made. There really are a lot of factors to consider before buying an established business. Fortunately, we are here to do just that!

‘Established Business’- Doesn’t Really Narrow It Down, Does it?

The idea might be there, but there is still research to do. You must choose wisely what business you want to purchase. Apart from the financial aspect, it should represent something that motivates you. It should align, at least to some extent, with your passions, strengths, and knowledge. After all, this is something you will be devoting your time to.


Furthermore, the general idea should be that you will be injecting a fresh surge of creative energy into the whole venture. You cannot do that if you know nothing about the industry or are not interested in what the business is striving to achieve. Think carefully about what fulfills you. Then think about how you could improve an existing idea to make the purchase all the more worthwhile. Don’t stumble on the first hurdle.

Talk to the Seller

There is a pre-existing myth; the seller is selling because they are jumping ship. This, usually, could not be further from the truth. In most cases, the business they have built up no longer aligns with their goals and/or lifestyle. They may want to move on to other things. This is not a sign that the business is going under.


In any case, talk to the owner, find out his reasons for selling, to give yourself a better understanding of what you are entering. Some answers could be interesting. Maybe the business is not as profitable as they had expected it to be. However, perhaps the level of profitability is more than acceptable for you. Furthermore, if you read the previous paragraph carefully, you may have a fresh spin that could make it as profitable as the original owner intended.

Due Diligence

Of course, you’re not going to go on the owner’s word alone. You need to inspect the books, look over the contracts and inspect the company from head to toe. Are there any red flags? Do you like what you see? Are there problems you think you can effectively overcome, or are they insurmountable?


Cash flow, tax returns, employee files, contracts signed with suppliers, leases… it’s unavoidable; at one point, if you’re not drowning in paperwork, you’re not doing it right. At the end of the day, it will be worth it. Of course, you need to understand why things such as cash flow are important and the nuances involved. Bringing in a reliable attorney or accountant to help comb through all the documents could be of great help.

A person holding a magnifying glass over a balance sheet.


One of the benefits of acquiring an already established business could be that they also have an established reputation. Reputations can go two ways, so be careful. If the word on the street is that the business is reliable and trustworthy, you could be on to a winner. If it has a bad reputation within the community, you may want to think again before purchasing. The Internet has made posting your reviews on almost anything possible… and easily accessible. See what customers are saying. It will also give an exciting glimpse into potential problems that things, such as financial transactions, cannot show. If there is a problem with customer service, for example, and you feel like this is something you can fix, this doesn’t have to be a deal-breaker.



Things to Consider Before Buying an Established Business?


– The Staff

In all probability, you will want to retain as much of the original staff as possible. They know the business; they have kept it going thus far, and, especially in the beginning, you’ll want to avoid turbulence as much as possible. There is only one real way to try and keep them on board – transparency. Let them know your plans and goals. Explain what changes they can expect in their contracts. By maintaining open communication with your new employees, you can hope to make the transition as pain-free as possible.

There is another side to the coin. Maybe you won’t want to keep them all on board. I already mentioned doing your due diligence, which involves finding out as much as possible about the employees themselves, their contracts, their achievements, their working relationships. It would be best if you were well informed about every aspect of your potential new business.

– The Price is Right

Of course, one of the factors to consider before buying an established business will be the price. Unlike the game show, this should be less about guesswork and more about really knowing how the asking price lines up with reality. Weigh up the pros and cons, do a cost/benefit analysis, does the expected growth and projected profitability justify the asking price? This is the final hurdle, so be sure you have thought about it carefully.

A one-dollar bill on a white background

– Inventory

One of the things you will be looking into is the business’s assets, including inventory. If all goes according to plan, chances are you will want to do a little bit of reorganizing. This will mean putting things into storage. The simplest solution for this is to rent warehouse storage. This way, you can avoid logistical headaches and organize everything as you see fit without worrying about anything being damaged or lost. Therefore, keep your inventory safe by finding a reliable company that can offer you the storage solution you need.

Welcome Business Owner!

Above are the factors to consider before buying an established business, and if, indeed, said factors have been considered, there is no reason you won’t find the perfect fit for you. As this is what it comes down to, finding an existing business that matches your aspirations but doesn’t contain any hidden drawbacks and financial pitfalls. There is some work to be done, but it is a serious undertaking and should be approached as such. If you have further doubts and difficulties, you always know whom to contact for reliable help. Don’t worry; once you take that fateful yet carefully thought-out step, our guess is you’ll never look back!

DISCLAIMER: The information contained in this article is for general informational purposes only and should not be construed as legal advice. You should not act or refrain from acting based on any information contained herein without seeking the advice of an attorney.