Once the decision is made to start a business, often the next decision is either to buy an existing business or start a new venture from scratch. There are advantages and disadvantages to both options.  Many find the idea of running a small business appealing, but lose their motivation after dealing with business plans, investors, and legal issues associated with new startups. For those disheartened by such risky undertakings, buying an existing business is often a simpler and safer alternative.

Advantages

The main reason to buy an existing business is the drastic reduction in startup costs of time, money, and energy. In addition, cash flow may start immediately thanks to existing inventory and receivables. Other benefits include preexisting customer goodwill and easier financing opportunities, if the business has a positive track record.

Disadvantages

The biggest downside to buying a small business outright is the initial purchasing cost. As the business concept, customer base, brands, and other fundamental work have already been done, the financial costs of acquiring an existing business is usually greater then starting one from nothing. Other possible disadvantages include hidden problems associated with the business and receivables that are valued at the time of purchase, but later turn out to be noncollectable. Good research is the key to avoiding these problems.

Purchase Research
Before making the final purchase, examine the business carefully. Use of a qualified attorney is important.

Determining Value
Know the elements to examine when calculating a business' value.

Sales Agreement
Essential elements that should be on the final sales agreement.

Due Diligence
Know the legal aspects of owning a business; includes zoning laws, permits, and the environment.

Closing Checklist
Make sure you and your attorney review the final points of the sale.