Why buy an existing business?

While it’s true that taking the entrepreneurial route and starting your own business can be hugely rewarding, there can also be a great deal of satisfaction in acquiring an existing business and helping it achieve even greater success than it may have done in the past.

Whether to start a business from scratch or acquire an existing one will often depend on the kind of business you’re looking to own. It might be that you’ve identified a gap in the market and need to start a new business, or maybe there is the ideal company for you already out there that might be open to an acquisition.

If you're unsure of which way to proceed, here are some of the advantages that come with buying an existing business.

A pre-existing infrastructure
To put it bluntly, one of the main advantages of buying an existing business is that much of the hard work will already have been done. While you, as a new owner, will doubtless seek to implement some changes post-acquisition, you'll be walking into a company that is fully operational, with plans and procedures already in place.

Even more valuable than this, however, is that you'll also be acquiring an existing base of clients, customers, suppliers and other contacts. Again, there may be some changes as you bed in as the new owner, but this is the kind of network that a new business can take years to build.

Finally, you'll be taking on a firm with existing cash flow coming in, the lack of which costs many start-up businesses dearly during their earliest days.

This perhaps counts as part of a business' pre-existing infrastructure, but it's significant enough to warrant specific comment. Acquiring an operational business means you're taking on an existing team of employees, managers and directors.

These figures will know the ins and outs of the business, meaning they can pass on experience and expertise and help you to acclimatise as the new owner. Once again, you might ultimately make several changes to the team, but the core will likely be in place, allowing you to learn on the job more easily and identify areas where you can deliver other improvements and changes.

Another thing to be said for acquiring a business with an existing team in place is that you'll be free to take time off. As anyone who's ever started a business will confirm, it's a job that goes way beyond being full-time and, ultimately, it's a sad fact that many founders at new businesses just do not have the time or money to give themselves a much-needed break.

However, if the staff are already there and know what they're doing, you will have the scope to go on holiday at your leisure.

Less risk
Acquisitions and business ownership are inherently risky and, for those reasons, thorough due diligence will be required before you move to make a deal. However, providing you target the right business, with solid processes in place, the risk is significantly lower compared to starting a new firm from the ground up.

With a profitable business, the company is running on a concept and business model that has been proven to work. With a startup, no matter how good the idea or mission statement, there is a great deal of hope and experimentation involved in finding out whether this idea can translate to commercial success.

By buying an existing business, you can begin to focus on driving growth from the first day and, perhaps more importantly, will have access to historical data on the company's finances and growth so far. This track record can enable you to see what the business has done well in the past and the best ways of securing growth for the future.

Such historical data can also be valuable in securing financing, loans and investment, something that startups often struggle to attract.