National Brokers Network

The Pros and Cons of Buying An Existing Business


So you were thinking of a potentially lucrative business and then fortunately, you learned from a friend that your favourite street cafe is for sale! Of course you’re interested, but is it a good idea? Should you invest your hard-earned money on a hunch that you’ll get it back in a year or two? After all, that street cafe is always jam-packed with customers any time of the day, right?


Buying a business for sale is appealing for several reasons, however managing an existing business is not entirely a bed of roses.  

Why sell anyway?

It is impossible not to think why an owner decides to sell his prosperous business venture. Why sell if it is doing pretty well, right? However, it is possible that

a) The owner is migrating

b) Their kids or any of their family members do not want to inherit the business, or

c) It is close to bankruptcy.

The problem with c is that this very important detail may be concealed from you as it can set back an existing for business for sale.

Regardless of all these possible reasons, what you need to do is this: ASK. Ask why he is selling in the first place. It is a valid question that requires a very honest response.

Related: Should You Buy An Existing Business? 4 Questions to Let You Know If You Are




If you are in the market for an existing business to buy, it is crucial that you buy the business that you already have experience managing in the past. It also helps to acquire an existing business where the product is close to your heart and your interests. But more than anything, be practical in this move you are about to embark on by knowing the pros and cons of buying an existing business.


The Pros

First, you skip the series of baby steps of starting up a business and the many trials and errors that you need to do as you go along. You acquire the 5 important aspects of starting one which are:

  • Contracts and suppliers
  • Staff
  • Equipment and stock
  • Customers
  • Lease of the premise

Second, you acquire the goodwill and the positive feedback of the business. You know you hit the jackpot if goodwill is associated with the name of the business as well as its location.

Third, the knowledge and the wisdom of the previous owner naturally gets passed on to you. If this is your first time in solo entrepreneurship, the knowledge and the wise words of the previous owner will definitely affect the way you manage his or her business from day 1 onwards.

Fourth, it will be easier for you to borrow money towards your existing business provided that the business has a positive trading record with your financier. Set up of the premises and the renewal of the leasing contract is easy too, since it has been previously negotiated.


The Cons

On the other hand, buying an existing business leads to the possibility that the staff and the customers may leave if they know that the management will be changed. Business owners have an effect on people they manage and people who follow their work. This is a possibility that is worth thinking about.

Second, it may be challenging to change a bad reputation to something better. Unless you have great marketing and advertising strategies up your sleeves, changing an image 360 degrees may take some time to take place.

Third, you may have to replace equipment or change locations if it is too old or too inadequate to retain. Titles may not even be easily transferable because the business may be overpriced against your budget.


Related: Why Gift Shop Is A Good Business?


Final words

Owning a business will require your strengths so it is best to invest in an existing business that you are comfortable managing on your own. You may have the help of your staff or a business consultant, but you are the main driver of this venture you will soon acquire. If you are mentally, physically and financially prepared to acquire an existing business, that should be your signal to proceed. Now if you are looking to buy an established business in Australia, determine the worth of the business by knowing some important considerations before actually buying.

Confidentiality Agreement

In Consideration of the Vendor of the subject business, or any other business introduced to the Proposed Purchaser and their agent National Brokers Network (“the agent”) providing information to the Prospective Purchaser, the Prospective Purchaser agrees:

1. To keep all information provided confidential in respect to the subject business and any other business introduced to the Prospective Purchaser by the Agent.
2. That no information is to be disclosed by the Prospective Purchaser to any third party without consent by the Agent;
3. That it will not use for themselves. Or for others benefit, such information other than to Purchase the subject business or other business introduced by the Agent;
4. That any agreement to purchase the whole or portion of the business shall be exclusively through the Agent;
5. To immediately return to the Agent all such information and other details in written form including any drawings and any copies made of written information, notes, summaries or extracts of any document therefor if any when requested by the Agent;
6. Under no circumstances will the Prospective Purchaser make direct contact with the vendor of the subject business or other introduced business without the prior written consent of the Agent;
7. If the Prospective Purchaser breaches this agreement or buys the business direct from the Vendor, the Prospective purchaser is liable to and indemnifies the Agent for any and all losses the agent may incur including economic loss and loss of income.v

Client Signature (Sign on the box below)