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One of the ways to start a business is to buy an existing one, but you have to exercise due diligence before closing a deal. Here are some advantages and disadvantages in continuing an existing business.
-The business may be bought at a bargain. This may be a more cost-effective option than starting a business from scratch.
-The previous owner has brought together assets which are necessary to conduct the business.
-The new owner acquires existing customers, so there's no need for intensive marketing campaign to get initial business from new clients.
-Income can start more quickly since there's no more waiting period for the business to take off.
-Business may have been a failure. Do a background check to know the real story behind selling the business.
-A business venture is almost certain to fail, so it makes sense to study their records of cashflow and operations.
-There's a need to connect with customers as a new owner especially if there were pressing issues on how the customers were treated by the previous owner.
With all these advantages and disadvantages in mind, here's what to do before buying an established business:
1. Get a competent CPA who knows the business to give you a full record of its financial and operating history.
2. Check legal and other business documents that permit the business to operate after purchase.
3. Get a full record of the labour relations of the business to know what needs to be improved to encourage productivity.
4. Investigate the business among its banks, customers, creditors and its community.
Read this document for additional tips in buying an established business and visit AllianceAccounting.com.au to get structured business advice.