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working for them under an already well established name that is synonymous with quality and service in the IT sector.Potential entrepreneurs, who arent sure what kind of business to start, but know they want to be on their own are often drawn to the idea of buying a readymade business. Whether purchasing an existing business or buying into a franchise or multi level marketing (MLM) program, the idea of having the operations portion of a business already laid out can be very attractive. Before you spend your startup cash on these options, there are a few things to consider about each.
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The advantages of buying an existing business are obvious cash flows should be immediately positive, receivables and inventory assets are already built in, you start out with a developed customer base, and the brand should already be established in the industry and market. In addition, the actual operations of the business are likely set and you will usually gain a staff of knowledgeable employees who are able to handle the basics of the business. At least, if the business has been well run, these advantages should come with the purchase price!
The primary disadvantage of purchasing an existing business is the upfront cost. Though you will save some startup costs in terms of time, cash, and energy over starting a business from scratch, purchasing a good existing business is likely to be expensive. In addition, there is a good chance that the business will have hidden issues that come to light after you close the deal, such as uncollectable receivables, worthless inventory, or well disguised cash flow problems. It is critical that you thoroughly inspect every aspect of an existing businesss financials, and understand what you are looking for, before you commit to a purchase.
You are also inheriting any and all less obvious problems when you purchase an established business. Image and culture issues are often very difficult to overcome. If the business has a reputation for providing less than ideal customer service, simply throwing an Under New Management banner up may not entice customers to try the establishment again. Any internal issues with employees may be even more pronounced with the introduction of a new boss, and any changes you intend to make may well be met with severe resistance, especially if the staff members have been with the business for a long time.
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