The current economic crunch is pushing many to look for ways to augment their income and one of the options seriously considered by many of them is to buy a business that already exist. Buying an existing business is better than starting a business from scratch. You have instant cash flow from day one coming from its existing customers. Besides, the foundations of an existing business have already been established and there is no more need for the new owner to go through the rigmarole of the groundwork involved with starting up a new business.

However, there are various drawbacks that one must seriously consider before deciding to buy a business that already exists.

You may end up investing more. Buying an existing business with great on going revenue often includes paying some ‘goodwill money’ in exchange instant cash flow generated by these businesses. This is equivalent to the franchise fees you pay when buying a franchise operation. On the other hand, if you buy a neglected business, you may have to invest more just the same for renovations to give it a better chance to succeed.

You may be buying a business that is not suitable for you. Often, this is something the buyer learns too late. Not every business suits all individuals. It will be money down the drain for a buyer to acquire a business which in the future turns out to be not to his liking.

You need to evaluate the current staff’s morale! They may not like the idea of having a new boss, or they may have been treated badly by the previous owner. Either way, this is a source of headache for the new owner. Training a new staff can cost you even more and may prove to be a real drain your pocket.

You may be over extending your financial resources. While it is easier to secure bank loans when buying an existing business, it may also prove fatal. Going into serious debts is a heavy responsibility and unless the newly acquired business is not able to generate sufficient income to pay off the obligation, it can signal your downfall.

You need to sift through voluminous records of the company you are buying to know its real worth. This can be an arduous task which includes reviewing income and loss statements, balance sheets, key assets, contingent and actual liabilities, and cash flow statements.

You need to review the outstanding contracts that previous owner is leaving you. You don’t want to be burdened with onerous contracts later on which may be rather difficult to get rid of.

To avoid risking your own personal assets in this new business venture you may have to set up a corporation or a limited liability partnership so that all contracts and agreements will not be in your name.

To buy a business that already exists can be a worrisome and complicated process with the whole caboodle of business, legal, and logistic issues you need to tackle. The best advice is not to buy a business that already exists.

Do you want to buy a business? Your resource on business can be found at www.workfromhomemethod.com!

Do you want to buy a business? Your resource on business can be found at http://www.workfromhomemethod.com!

Author Bio: Do you want to buy a business? Your resource on business can be found at www.workfromhomemethod.com!

Category: Business
Keywords: existing business,already exists,cash flow,business suits