At Armen Nazarian Business Brokers, we are professional Michigan business brokers, which means we help investors with business acquisitions and business sales. We help entrepreneurs buy businesses or find potential buyers on behalf of our clients looking to sell their businesses.
As business brokers, we often hear business buyers ask the same question: “Is buying an existing business a better investment than starting a new one?” This is a legitimate question that everyone should consider when looking to become a business owner.
We are trusted and experienced business brokerage experts so we can ease the decision-making process for you. In this article, you’ll learn all about the pros and cons associated with business buying. Also, we’ll tell you why consulting business brokers can maximize your success with your newly acquired business.
By the end of this article, you’ll have armed yourself with the knowledge that can help you make a better decision on whether or not financing an existing business is worth it.
The Pros of Buying Existing Businesses
As a business buyer in Michigan, you’ll likely have factored in the benefits of investing in an existing business. Without a doubt, buying a business anywhere in the state confers multiple benefits.
Let’s get into them in greater detail.
Good Financing Options
Financing a business purchase is no easy task, especially if you are starting one from the ground up. To get a business loan, you’ll have to present your plan to a financial institution or prospective investors. In the business plan, you must prove that your business will present minimal risk and yield great returns, otherwise, you won’t get funding.
Proving both will be challenging and won’t open many financial options. However, when you’re buying an existing company, the game changes significantly. It’s easier to secure financing since a business’s existence reassures institutions that the business can survive and yield profit.
Financial institutions are more likely to provide you with various options to help finance your business purchase and operation for businesses already built.
Established Brand and Customer Base
Another benefit of purchasing a company from established business sellers is that you don’t need to create the brand and reputation from scratch. In other words, when you buy a business from a business seller, your acquisitions will include the company’s branding and customer base.
By purchasing an already existing business, you don’t need to re-establish the business in the industry. Instead, you can simply adjust the business’s operations to your satisfaction while its existing customers continue to utilize the company’s goods and services.
In short, buying an existing business removes the time-consuming task of brand-building. You don’t need to start your lead generation from scratch. Right when you buy the business, you can immediately start finding creative ways to increase the already established customer base.
Existing Relationships With Vendors and Other Business Partners
Your purchase through a Michigan business broker means you inherit the business’s network. In particular, you’ll acquire the business’s network of vendors, suppliers, and business partners with your purchase.
By acquiring the business, you’ll benefit from the company’s close contacts and partners. Even in the early phases of your operation, you’ll have business partnerships available to resume operations.
For example, if you have acquired a company that sells coffee, you don’t need to seek bean suppliers and retail vendors to keep your operations going. The suppliers will be there ready to supply your company with the coffee you need without disruption.
Another asset you’ll inherit as part of the business acquisitions is the staff. The business sold to you will have trained employees continuously manning your new business’s daily operations.
With employees trained and ready upon the completion of your transaction, you don’t need to build your workforce. Barring any organizational changes you’d like to make, you don’t have to hire new employees to fill your new company’s ranks.
Proven Business Concept
When you’re starting a business from scratch, one of the challenges is developing your business concept. It doesn’t matter how much market research you conduct or how much money you invest; it will be a while before your business concept yields large returns for your company.
However, there’s a better way: You can buy an existing business that has endured for years in Michigan.
If you’re buying an existing business, you can be sure of one thing – it is not a struggling, new concept. As many business sellers, buyers, and business brokers will know, longevity shows that a company possesses a sound business concept.
Of course, not every business will have a business concept you’ll be successful continuing. For this reason, contact an experienced team of business brokers to evaluate any potential businesses. By speaking with us, you’ll see which companies mirror your business philosophy. As a result, you’ll be able to buy a business with a business process and concept that assures you of success.
Reach out to our professional business brokers for more information.
Business Processes that Work
With a proven business concept comes proven processes that have enabled a business to operate for years. When you acquire an already established business, you’ll get a business with proven ways to handle business transactions and business operations. A little tweaking may be all it needs to generate greater returns.
The Cons of Buying Existing Businesses
Without a doubt, buying a business makes getting into entrepreneurship much easier. Nevertheless, there are a few concerns you must be aware of before you contact your business brokerage.
Here are some things to think about before you reach out.
Outdated Equipment and Technology
Let’s start with the logistical side of a business. Some businesses will be more tech-reliant than others and need the latest technology. Hence, a tech-reliant business with outdated technology may be an unwise investment since you’ll need to invest even more money to bring it up to par.
Now, we’re not saying that you shouldn’t consider a business that is in need of equipment upgrades. You can. Such businesses may even present better value for you if you’re willing to pay for equipment overhauls or upgrades.
We will, however, advise you to get a business valuation from an experienced team of business brokers. This way, you won’t find yourself paying too much for a business with outdated equipment.
Business Operations May Need Significant Changes
As mentioned earlier, you don’t need to build your branding and process from the ground up when you buy an existing business. However, not every business will have the concepts, processes, equipment, and operations you want to continue. Many will require significant changes, especially if you want to take your new business in a different direction.
You might want to rebrand your business, and you may perceive some of the processes as inefficient or ineffective. Perhaps, you’ll aim for a different set of consumers.
Whatever the case may be, there will always be something to change with every business sold to a new owner. With that said, acquiring a new business at the best price is important, especially if you want to make expensive changes.
You can estimate a reasonable price for your new business by speaking with a business brokerage and getting a business evaluation. Contact us to learn more about how to maximize your business investment.
High Initial Investment
Every new business owner will deal with initial investment costs. In almost every business valuation, the initial investment of buying an existing business will always be high.
We can attribute the costs to several things outside of the business’s value. Expenses like attorneys, licenses for franchises, and other professional fees will add to the upfront costs of any business acquisition.
Hidden Problems With the Business
Beware when you’re dealing directly with business sellers. Business sellers may be too eager to close the sale of their businesses because of a hidden list of problems.
This can put you, the buyer, in a precarious position. By purchasing a business with hidden problems, you’ll be inheriting the company’s legal, operational, and financial issues. Your newly acquired business may be more of a liability than an asset.
To protect yourself from a business’s hidden problems, avoid dealing directly with the owners selling their businesses. Instead, contact a reliable business broker.
A brokerage will find you new listings of businesses with little to no issues. Contact us today to learn more about how we determine qualified buyers and sellers.
How a Business Brokerage Can Find the Perfect Business for You
As a buyer, you can benefit from the services of business brokers. They can connect you to the perfect business in several ways.
Business Brokers Streamline Business Transactions for You
Business transactions can take time depending on the business you are acquiring. Brokers can help identify businesses that need less work, thereby speeding up the process for you.
Business Brokerage Evaluates the Problems of the Business for You
Finding a business without problems is challenging. However, business brokers facilitate the business-seeking process.
They can identify and evaluate businesses to seek out the hidden potential problems for you. With a business broker guiding you, you’ll acquire the best business for a fair listing price.
When you deal directly with business sellers, sellers may put you on the hook to buy their businesses. This may not be a problem. However, problems may surface mid-way into business transactions, and it may be too late for you to back out of the sale.
Keeping your identity a secret helps you to keep your options open. A business brokerage deals with sellers on your behalf and maintains your confidentiality throughout the business-selling process.
Call a Business Broker With Extensive Experience in Michigan
As a qualified buyer, you deserve the best price for any business you wish to acquire. For a safe and profitable business-buying or business-selling experience, get help from business brokers.
At Armen Nazarian, we are capable of making your transactions profitable and safe, whether you’re selling your business or buying one. We are within your reach in the metro Detroit area, including Oakland County, Macomb County, and Wayne County. Reach out by calling us at (248) 231-7714.