An established structure.

The best pre-owned businesses have a proven business concept. They also have a recognizable brand, an established customer base, a dependable base of vendors and suppliers, trained employees, a complete set of procedures and processes, and a deep understanding of their competitive positioning.

When you try for organic growth, you can spend a significant amount of time and resources developing these parts of your business. But when you grow through acquisition, you can acquire most (or all) of them in a single transaction.

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Faster ramp-up.

If part of your business strategy is to add new product lines, internalize more of your supply chain, or take on new kinds of work that require specialized skills, supply, or equipment, you may be able to buy a business that already has those pieces in place.

You’ll likely invest time into revamping processes, eliminating duplicate costs, or synching up systems. Still, you’ll probably avoid the lengthy ramp-up time many spend configuring these options from scratch. Plus, you’ll benefit from the trial-and-error lessons your target business has already learned.

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Clarity of costs.

When you grow through acquisition, you’ll be able to examine the company’s financials before agreeing to take control of it. You’ll see how profitable, indebted, or costly it is to run because you can examine years’ worth of records before the sale.

When you try for organic growth with new product lines or markets, you don’t always have this advantage. You may make projections, but it’s easy to underestimate the capital you need to help your business thrive in new contexts.

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The ability to bypass some initial-phase costs.

Organic growth comes at a cost. Between buying new supplies and equipment, developing marketing and web campaigns, and getting the word out about new offerings, owners can spend a significant amount of money in the first one to three years of their expansion efforts.

As a business buyer, you could bypass many of those costs. This is often the case when the business you choose is well-established, running smoothly, and well-known in its market.

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High upfront costs.

Purchase prices can be significant because they account for more than just the assets and equipment a business holds. As a buyer, you’ll gain rights to the business’s brand, customer base, concept, strategic plans, processes, intellectual property, and capacity for profit.

Because of the value of those elements, many businesses sell for one to four times their cash flows with prices that can range from thousands to millions of dollars.

You may be able to acquire the funds you need to purchase a business through SBA loans, seller financing, or other financing options, but the process to attain funding can be lengthy, and the funding comes at a cost.

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Steep learning curve.

By buying a business, you’ll take over an operation that runs on processes, policies, and practices. All of these will take time to learn. You might find it difficult to get up to speed quickly and gain the knowledge you need to guide the business effectively out of the gate.

There is a workaround. Many arrange for seller support after the purchase of their business, either by hiring them as a consultant or employing them for a short period of time. You might also be able to retain some managers or employees who can keep the business running smoothly through its transition.

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Potential for unforeseen problems.

Before you grow through acquisition, you’ll take part in a rigorous due diligence process that should help you spot the business’s problem areas and risks. However, there is a possibility that you’ll uncover additional problems once you take ownership, and those problems could be costly to solve or quite difficult to navigate.

Those problems may include: