New Venture Lab: Equipping Christian Entrepreneurs

Question

What are the benefits of buying an existing company?

Answer

When you buy an existing company you are usually buying a going concern with a name, structure, product or service, customers, brand, reputation, cash flow, history, employees, facilities, etc.  While you may have to make many "tweaks" to an existing company after you buy it, you are not building from scratch, which can take much longer and can be far costlier that what first meets the eye.  Think of it as buying a home rather than building one yourself.  It can be very difficult to build one from scratch unless you know exactly what you are doing.  Of course there are also draw-backs to buying a business.  You may well have to completely change the existing company culture, many customers won't be a good fit, often the equipment you purchase is outdated or in need of repair, etc.  Buying a company also puts you on the defensive: you basically pay the seller a lot of money for their company and then you hope and pray you can hang onto all the customers, employees and earnings that you paid for.  Be sure to perform thorough due diligence prior to the purchase.  (See our due diligence checklist.)