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BUYING ESTABLISHED BUSINESS

The previous owner has brought together those assets which are necessary to conduct the business. The new owner can benefit from his knowledge and experience, and avoid making some of the mistakes which he might otherwise make. When buying a going business, the new owner acquires customers. Thus, a certain volume of business can be accurately predicted. To that extent the risk is reduced.

Stepping into a going business gives the new operator the benefit of a running start. He does not have that initial waiting period. The income can start more quickly. There will be less drain on the resources during the period when trade is being developed.

As with so many things, these benefits may be offset by disadvantages. Some of these are The previous business may have been a failure. Such a business would carry a handicap because it is difficult to overcome its reputation.

There are some locations where a business venture is almost certain to fail. It may not always be wise to take advantage of the bargain offered by a predecessor. It may be that sufficient business could not be developed at that location, regardless of the owner's ability.

While it is an advantage to step into a going concern and receive the benefit of someone else's skill and judgment, buying a going business may result in saddling the buyer with his predecessor's mistakes. The previous owner may have made poor choice of equipment or been unwise in his inventory purchases.

Although the going business inherits certain customers, it also penalizes the new owner. Potential customers may have formed the habit of not trading with it. It may be some time before they have a chance to become acquainted with the new owner or even become aware of the fact that the business has changed hands. (This difficulty may be overcome by good management and advertising.)

But even though a going concern is bought, it can become a new venture—under new management and new policies—perhaps with a new front and new interior layout. The new venture, clearly so labeled, often attracts people who like to try new things and trade at new places.

Related terms include small business start up and business information system.