About
About Us
Leadership Team
Annual Report
Mutual Growth Podcast
Impact Report
Resources
Knowledge Center
Financial Calculators
Financial Quizzes
Security Center
Contact Us
Careers
Find a Branch Near You
215.788.1234
Find a Branch
215.788.1234
site logo
  • Personal
    • Bank
      • Checking
      • Savings & Money Market
    • Borrow
      • Credit Cards
      • Home Equity Loans & Lines of Credit
      • Home Mortgages
      • Personal Loans
      • Meet The Team
      • Apply for a Loan
    • Manage
      • Online Banking
      • Mobile Banking
      • Visa Debit Cards
      • Your Credit Score
      • Credit Cards
      • Zelle® Complete
      • Safe Deposit Boxes
    • Personal Banking Rates
    • Financial Calculators
  • Small Business
    • Bank
      • Checking
      • Savings & Money Market
    • Borrow
    • Manage
      • Cash Management
      • Merchant Services
    • Meet The Team
    • Industries
    • Resources
  • Commercial
    • Bank
      • Checking
      • Savings & Money Market
    • Borrow
    • Manage
      • Cash Management
      • Merchant Services
    • Meet The Team
    • Industries
    • Resources
  • How We Grow Communities
    • Community Commitment
    • Penn Community Foundation
    • Community News
  • Log in
site logo
  • Log In
  • Personal
    • Bank
    • Checking
    • Savings & Money Market
    • Borrow
    • Manage
    • Personal Banking Rates
    • Financial Calculators
  • Small Business
    • Bank
    • Checking
    • Savings & Money Market
    • Borrow
    • Manage
    • Meet The Team
    • Industries
    • Resources
  • Commercial
    • Bank
    • Checking
    • Savings & Money Market
    • Borrow
    • Cash Management
    • Merchant Services
    • Meet The Team
    • Industries
    • Resources
  • Communities
    • Community Commitment
    • Penn Community Foundation
    • Community News
  • About
    • About Us
    • Leadership Team
    • Careers
    • Annual Report
    • Mutual Growth Podcast
    • Impact Report
  • Resources
    • Knowledge Center
    • Financial Calculators
    • Financial Quizzes
    • Security Center
  • Contact Us
Careers
Find a Branch Near You
215.788.1234

Buying an Existing Business

The joy of owning a business is the dream of many would-be entrepreneurs. If you are one of them, you have two main choices: start a company from scratch or find an already existing business. Your dream can become a reality more quickly if you decide on the latter.

Here’s a look at important points to consider if you are thinking about buying a company.

Pros and Cons

The biggest benefit of buying an existing business is that the company is already in operation. Many of the kinks and early startup decisions, such as the site’s location, have already been worked out or decided.

Money is one of the biggest concerns of a budding entrepreneur. Buying a business has both pluses and minuses in this regard. On the plus side, you do not typically have to worry about startup costs. Another plus is that immediate cash flow is often available from receivables and inventory.

A company that is already in business has existing customers, and hopefully, goodwill on tap, too. If you need a loan to upgrade equipment or purchase new supplies, financing is usually a smooth process based on the business’s’ track record and profit and loss statements.

Of course, there are downsides. The biggest is the upfront cost: namely, the purchase price of the company.

In addition, hidden costs and problems may be buried where they are hard to see prior to taking ownership. There can be debts and taxes owed by the business or uncollectible receivables. There could be problems getting inventory, technological advances that make the product line obsolete, or overwhelming competition.

Though you will now be a proud new business owner, you still need to build a good working relationship with the managers and employees currently running the company.

Finding a Business to Buy

Deciding to buy is step one. Then, you need to start researching existing businesses to find one that is a good fit for your budget and your interests.

Good places to look include:

  • Trade associations, magazines, and websites
  • Local chambers of commerce
  • Online businesses-for-sale websites
  • Brokers
  • Your immediate area

The process of identifying and evaluating a business can seem daunting. Hiring a business broker is a good way to ease your way through the confusing jungle of buying a company. They can help you figure out exactly what type of business, location, size, and price you seek. Then they can use their industry contacts, skills, and experience to pre-screen firms for you.

Negotiating is an intricate dance, but brokers are well versed in the process. They also know how to handle the paperwork required by local regulations, licenses, permits, bank financing, and escrow.

Things to Consider When Buying a Business

You need to protect yourself when buying a business. Having a team in place to advise you, including an insurance agent, accountant, attorney, and banker, is highly beneficial.

Together, you can conduct due diligence and a thorough analysis of each company you are consider purchasing. Among the questions you need answers to are:

  • Why is it for sale?
  • What is the outlook for success, in the immediate future, the next year or two and then five and ten years down the line?
  • Is the industry a growing one? Is this particular business growing?
  • Does it have the customer base now and in the future to show a profit?
  • Is inventory a problem? Are raw materials scarce?
  • Is the product line viable? Does it need to change? What is the overall cost of that?
  • What is its reputation with customers, suppliers, within the industry, with the Better Business Bureau and credit bureaus?

If the business looks viable and the future looks profitable, the next step is for you and your team to dig deep into the operating details of the firm and analyze the overall financial health of the company. This involves an in-depth review of the history of earnings and losses, analysis of potential growth, and the worth of its brand name, goodwill, and position in the market.

Next, you’ll need to investigate financial statements in order to project future returns. If this is not in your wheelhouse, you’ll need an expert who understands balance sheets, cash flow statements, accounting footnotes, tax returns, and income statements. You should go back at least three years if the information is available.

Buying the Company

Once you decide a business has potential and is within your financial means, it is time to negotiate a price. Most owners prefer to let members of their team, including the broker, do this. They are professionals who keep a focused, impartial view of the process. The result of their more impersonal bargaining style is often a better price for you.

It is critical to have professionals around you that you trust. There are many types of legal and finance documents, from security agreements to bills of sale and IRS forms, that may need expert review. The process is complicated and can be stressful. Rely on a team of experts so that you get the best deal possible.

Lastly, your final step is transitioning into the ownership position: getting to know the employees, the product line, new premises, customers, and suppliers. Taking on an existing business is not always smooth or uncomplicated, but with some expert help, hard work, and patience, it can be a profitable and exciting endeavor.

Posted on June 5, 2019July 16, 2021Author Penn Community BankCategories Business Banking

Post navigation

← Recordkeeping Basics
Location, Location, Location →

Search

Recent Posts

  • Celebrating the Career of Diane Brown
  • Reflections During Women’s History Month
  • Daylight Savings: Spring Savings Tips
  • Protect Your Accounts by Avoiding Phishing Scams
  • Celebrating International Women’s Day

Categories

  • Business Banking
  • COVID-19
  • DE&I
  • Digital Banking
  • Economic forecast
  • Financial Literacy
  • General
  • Personal Banking
  • Podcast
  • Residential Lending
  • Security

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • November 2018
  • October 2018
  • August 2018
To give you the best possible experience, this site uses cookies and by continuing to use the site you agree that we can save them on your device.
Accept
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT

215.788.1234 Find a Branch Near You

Personal Bank Borrow Manage Personal Banking Rates Financial Calculators
Small Business Bank Borrow Manage Meet The Team Industries Resources
Commercial Bank Borrow Manage Meet The Team Industries Resources
How We Grow Communities Community Commitment Penn Community Foundation Community News
Security Center Privacy Policy
Accessibility Statement Site Map

US Routing Number: 231373182 
|  Penn Community Bank NMLS #: 434939

© 2023 Penn Community Bank. All Rights Reserved