Discuss the advantages and disadvantages of purchasing an existing business.
What will be an ideal response?
There are some advantages to buying an existing business:
1. Established customers provide immediate sales and cash inflows. Because the business is already successful, it has proven that there is sufficient demand for its products and services to operate profitably.
2. Business processes are already in place in an existing, operating business. This eliminates the need to hire employees, find vendors, set up accounting systems, and establish production processes.
3. Purchasing a business often requires less cash outlay than does creating a start-up. The seller will often provide financing that makes it possible for you to buy the business.
The disadvantages to buying an existing business include:
1. Finding a successful business for sale that is appropriate for your experience, skills, and education is difficult and time-consuming.
2. It is very difficult to determine what a small business is worth. The value of a small business can never be known with certainty. You must rely on analyses, comparisons, and estimates.
3. Existing managers and employees may resist change. It can be very difficult to convince employees to adapt to new business methods, procedures, and processes that can provide increased profits.
4. The reputation of the business may be a hindrance to future success. Sellers are usually reluctant to tell you about problems that the business has. Business owners are especially sensitive about discussing past disputes and lawsuits with vendors and customers.
5. The business may be declining because of changes in technology.
6. The facilities and equipment may be obsolete or in need of major repair.
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Fill in the blank(s) with correct word