Jump to Main Content
USA flagAn Official Website of the United States Government

What are the advantages and disadvantages of buying a business?

Answer: 

Advantages:
Among the many favorable aspects to buying an existing business is the drastic reduction in startup costs. In addition, cash flow may be immediate because of existing inventory and receivables. Other positive effects include existing goodwill and easier financing opportunities, assuming the business has a positive track record.

Disadvantages:
Among the biggest downsides to buying a small business is the initial purchasing cost. As developing the business concept, customer base, brands, and other fundamental work has already been done, the costs of acquiring an existing business may be greater then starting a new business. 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.