Becoming a business owner | 4 min read

Why you should buy an existing business

Last updated: November 25, 2019

More than 60% of Australian small businesses stop operating within the first three years. So it’s no wonder that buying a business that’s already seen some success is such an attractive proposition. Here are seven reasons why buying an existing business will give you more chance of success compared to starting a new business from scratch.

1. Minimised risk

No business venture comes without risk but buying a business that already has a proven concept means you’re not totally jumping into the unknown.

With a tried and tested idea, existing processes and a business plan, you can more easily forecast profits and make other key business decisions for the future.

With an existing business you know what you’re walking into. New businesses are constantly faced with surprises, from financial and competitor curveballs, to finding new suppliers or reinventing a marketing strategy. But, if it’s already up and running you can avoid the groundwork, uncertainty and costs associated with the start-up phase.

2. Proven concept

Getting systems in place can be one of the toughest things about setting up a new business. But when you invest in an established business, the original owner has already built the foundations. They have worked out the location, store fit out, advertising, pricing, suppliers, so you don’t have to figure it all out from scratch. If you’re buying a successful business, you might not need to change much about the way things are run.

Inheriting streamlined processes, policies and systems also means you can focus on growing your business from day one. Instead of getting your concept off the ground, selecting the best suppliers, or figuring out how to get the word out, you can put your energy directly into improving the business.

3. Established brand and goodwill

If the business you buy has built up a good track record and positive brand recognition, that should roll over when you take ownership. This gives others more confidence to work with or buy from you and means you don’t have to work so hard to establish a market for your product or service.

While you’ll still need to prove yourself as the new owner, any built up goodwill that gets passed on will mean you don’t have to work so hard to show that your business is reliable. You’ll also benefit from the experience of the original owner who can give you valuable insights on running the business and help set you up for success.

4. Immediate cash flow

Having income from day one is a major benefit of purchasing an existing business.

For most businesses, the start-up phase is a tricky one. It tends to involve shelling out money to get things set up, while not actually making any money. It can also be a stressful, sleepless, challenging period.

Stepping into an established business that will give you income from day one means you can immediately start reinvesting and growing the business, rather than worrying about basic resources and set up costs.
Having the freedom to choose how to invest your income from the get-go and a financial history that you can use to forecast is a huge asset to any business owner.

5. Existing customers and staff

Finding clients is generally a key business focus, so having customers before you’ve even begun is a great jump-start. Building on the existing customer base, rather than building it from scratch is a major perk.

Another people-based asset you can inherit with an existing business is staff. If you can hold onto well-trained employees it will be easier to implement growth strategies from the start, instead of bringing new people up to speed. Existing staff can pass on their own experiences and ideas to improve the business. They can also help keep things running smoothly as you transition into ownership.

6. Established network

Most existing businesses will come with an established network of contacts like suppliers, lenders, or marketing agencies. While you might need to renegotiate some of the contracts, you may also be able to simply run with some of the existing agreements.

You can also benefit from the knowledge and handover from the existing owner who can introduce you to the business’s community.

Already having an established network of contacts and someone who can show you the ropes undoubtedly makes things easier and means you can hit the ground running.

7. Easier to secure finance

It tends to be easier to get funds to buy an existing business than to invest in a start-up.

Most banks and lenders are more inclined to finance an established business that has a proven track record, rather than an unknown start-up. This is because they incur less risk lending money to a business that has already had some success, a financial history and has proved it can make money.

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Stepping into an established business takes less time and effort than building one from the ground up and comes with tonnes of perks.

While business ownership always involves risk, buying a business means you can bypass many of the start-up challenges and jump right into the running and building phase.

Think it might be time to own your own business? Check out our ultimate guide on how to buy a business.