The Small Business Bible: Everything You Need to Know to Succeed in Your Small Business, 3rd Edition

Chapter 3

Buying an Existing Business

Some regard private enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow that they can milk. Only a handful see it for what it really is—the strong horse that pulls the whole cart.

—Winston Churchill

Starting a business from scratch is a daunting task. You must do everything right, from picking the right business, to giving it the right name, to finding the right location and lease, to getting a business license and insurance—and that is just for starters. It is no wonder that many budding business owners opt to buy an existing business.

Buying someone else's business has several advantages. First, you will not be starting from scratch; the business already exists. Second, you will not have to create “goodwill”—a favorable reputation in the community. That important aspect has already been handled by the current owner. Third, it is quicker—everything should already be in place to hit the ground running. But the main benefit of buying an existing business is that it reduces your risk. A wise man once said that an entrepreneur is “a person who is willing to take a risk with money to make money.” As I've mentioned, there is no guarantee that you will make money. A business risk, a calculated business risk, is one thing that makes being in business so fun and exciting.

But notice that I said a calculated business risk. Remember, great entrepreneurs are not gamblers—rather, they seek to reduce risk as much as possible. ...