In our previous piece, we examined what you should look for in the brand of an existing business that you’re interested in acquiring, outlining three key elements of branding that you should consider when you’ve made up your mind to buy a pre-existing business.
In this week’s blog, we’re going to go slightly earlier in the acquisition process, and discuss some of the advantages that buying an existing business has over starting your own.
While we don’t want to put anyone off pursuing their entrepreneurial aspirations and trying to forge their business vision into reality, these are just some things that we think it is useful to consider if you’re wondering whether to buy a company that’s already on the market.
1 – Instant access to a business infrastructure:
First and foremost, buying an existing company is less work than starting one up from scratch. While the process of acquiring a company is by no means a simple one and offers plenty of unique challenges, there is little denying that, on the whole, it represents a lot less effort than starting up.
One of the key reasons for this is that so much of the infrastructure of a business will already be in place. To put it in pretty stark terms, a lot of the hard work will have been done by someone else. There will be business plans and procedures in place and, while you may well wish to change these as your tenure advances, the company will already be operational by the time you come in.
Most enticingly, however, you will be instantly acquiring an existing set of customers, clients, contacts, suppliers and various other partnerships associated with a business, the kind that it can take a new company years to build.
And, last but not least, it means an instant cash flow. While you may of course choose to invest, there will be pouring your money in and getting nothing back in return.
2 – People:
This is arguably part and parcel of point 1, but it can be so significant an advantage that its worth considering on its own.
When you acquire an existing business, you will be acquiring a team of employees, managers, directors and so forth, who already know the business and will be ready to share their experience and expertise with you and help you acclimatise to your new environment.
As with point 1, someone else has already done the hard work of finding, training and developing these people and, as such, they can both help you adjust and, when the time comes, be well-prepared to put your strategies into action.
A perhaps underrated aspect of this, which will be music to any entrepreneurs’ ears, is that an existing employee base gives you more freedom. If you’re starting a business and choose to go on holiday, the running of your fledgling company either goes on holiday with you, or stops.
With a team in place, you have more liberty to take valuable time off, knowing the company is in good hands.
3 – A proven concept and less risk:
If you’re looking to acquire a business, its certain that you’ll conduct your due diligence in order to choose the right one. For this reason, once you’ve selected your business, you already know that their process or concept works, unlike with a startup, which is often a case of going to market and praying for the best.
With an existing company, the market for its product or service is already in place, meaning that you can begin to focus on growth from day one. But, what’s more than this, you’re also acquiring a financial history, a track record that you can look to as you seek to move forward.
This is extremely valuable for numerous reasons. One, it can help you get a good picture of the state of the business and give you an idea of what to expect moving forward. Secondly, historical revenue can ensure that you can access financing, secure loans and attract investment far easier than you would be able to starting from the ground up.
While it is always a risk to strike out on your own and become a boss, choosing to do this at a company that’s already in operation eliminates some of the risks that you might take on were you to start from scratch.