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Business formation: Buying an existing business may be better

The business entrepreneur in Oregon who is contemplating opening a new business will also face the issue of whether it might be better to purchase an already existing business. Sometimes, the overwhelming range of activities needed for business formation from scratch will deflect the entrepreneur's enthusiasm for the project. The effort of buying an existing business instead of new business formation has some attractive benefits that may make it easier for an investor.

An ongoing business has a flow of income already started, subject to evaluation by the records of the company. It is well-known that starting a business from scratch usually means some extended period to get the operation to turn a profit. However, with an existing business the operational tools are already in place and functioning, making it easy to keep making a profit that was already established.

It is also beneficial to have an established brand already in place with the existing business. One purchases existing marketing, advertising, name recognition and networking contacts. Starting a new business requires starting from nothing while trying to introduce and promote one's brand.

An investor should not discount the advantage of having an infrastructure already in place. An exiting business has it payroll, internal operational procedures, IT systems and the like already in operation. The new owners presumably only have to tweak the existing systems and let it grow from there. When buying an existing business, it is common for buyers to use a broker. These professionals do charge 5-10 percent, but it is likely worth it, all things considered.

There are also the online listing sites and placement services that exist for purchasing and selling a business. These tend to cut out the middleman and save the buyer money. Many companies will wait until a deal is on the line and then bring in the business broker to help close the deal successfully. In these several ways and others, buying an existing business is easier and less risky than starting from nothing. This method will also cut down on the customary business formation expenses in Oregon and elsewhere that are generally incurred in starting a new business.

Source: smallbizdaily.com, "3 Reasons to Buy an Existing Business instead of Starting a New One", Bruce Hakutizwi, Nov. 16, 2017

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