The obvious advantage to buying an existing business is that it has a proven track record of success. But that doesn’t mean that there are no possible pitfalls that you should avoid.
Consult qualified professionals to properly evaluate the information that the owners of the existing business may provide you. Also, make sure that the reasons why the business is on the market are true. Is the owner really planning on retiring to Florida, or is he or she just trying to escape the crushing debt that the business has accumulated over the last few years?Perhaps the greatest problem in buying an existing business is that you might not acquire the expertise and services of the existing owners, who have often accumulated goodwill with their customers or clients. However, when a business is bought, it is not unusual for the previous owners to stay on for a period of time to assist with the transition and to make introductions to clients in an attempt to transfer some of that goodwill.
Also, keep in mind that you may be taking on a heavy load of debt in acquiring the business. A business that is marginally profitable may not be able to both pay off the debt service on the loan and pay you a living wage. HBM
The California Society of CPAs (www.CALCPA.org), the nation’s largest state, non-profit professional association representing more than 30,000 CPAs, has created a free web site of articles, tools and resources to help business owners and consumers. These resources can be accessed by going to: “Dollars and Sense.”
