Advantages and Disadvantages of Buying a Business.

Lan Nguyen, Chartered Accountant

Advantages: Sense of security is obtained when buying an existing business.

Existing customers and goodwill

• An established business will generally come with existing customers, clients, suppliers and staff.
• This eliminates much of the effort and expense needed to generate goodwill, branding, advertising and hiring staff.

Expenses and finance

• The business is already operational and stock is already on hand, so your initial expenses would be minimal and you can quickly generate a cashflow.
• If you need to obtain finance, it may be easier because the business has a proven track record.

Training and assistance

• First-hand experience is valuable and the previous owner and employees remaining with the business are best placed to give you the training and assistance you need.

Sounding pretty good so far?

Disadvantages: But an existing business does not come with a guarantee of future success!

Goodwill may not last

• There’s a risk that customers and clients may leave when the business changes hands.
• Staff may wish to leave too and you may have to pay their entitlements, such as long service leave.
• The departure of the owner may have a negative effect on the business, so profit is not guaranteed.

Reputation

• The business may have a bad reputation or have made a poor impression in the past – this might prove difficult for you to turn around.

Premises and equipment

• The premises may be inadequate and the equipment or stock may be out dated or in need of replacing or repair

Written by Lan Nguyen, Chartered Accountant and Wealth Adviser from Success Accounting Group.

---

---

The team at Success Accounting Group are more than happy to guide you through any business stage that you are currently in.

We offer a free 30 minute consultation for new clients.

Please click here to make an appointment

comments powered by Disqus