In every endeavor that you may want to take you should always consider the two sides of the coin. In buying an on-going business there are major disadvantages that you must take into consideration before handing over that check to the owner. Below are the aspects to be aware of:
1. Inheriting ill will. As the buyer, you may inherit ill will. The product or service may have been allowed to deteriorate, alienating customers. Or the attitude of sales personnel toward customers may have destroyed a good image. In taking over ownership, ill will can get you off on the wrong foot.
2. Inheriting incompetents. It is possible to acquire incompetent personnel with the purchase of the going business. Indeed, one reason for owners wanting to sell may be their inability to acquire or hold competent help. This can be a serious flaw in the business. You should check it carefully.
3. Bad precedents. Some bad precedents in policies, procedures or customs may be inherited with the business. These could be in external relationships, such as selling to poor credit risks or long delays in paying company bills. Also, bad conditions could exist in internal operations, such as having a consistent and well understood salary review program for employees, or having unsafe working conditions.
4. Antiquated facilities. The buildings and equipment may need modernization. Nothing is as frustrating as trying to fit up floor space or turning out accurate screw machine parts in quantity of an old-fashioned, slow machine. This is definitely acceptable for someone eyeing for a digital printing company. Machines and equipment that are used in postcard printing for instance must be in a good running condition and is able to produce high quality prints. So, make sure that the facilities are up to date for your purpose.
5. Obsolescent inventory. The inventory of merchandise, raw stock, or supplies may be obsolescent. The usability of inventory is often extremely difficult to determine, yet you should conscientiously make the effort. The seller may be carrying inventory on the books at original value when in fact it may be essentially worthless. If you are not aware of this, you might pay good money for worthless stock.
6. Overpayment. A major disadvantage in buying can come from overpaying for the business, if you should overpay significantly, you’ll find that your profits will be limited. It will take a long time to recover from the hidden loss. You’ll need to plan proactively to increase the profitability of the business.
You can see from this list the possible disadvantages in buying a business so be guided that you must be careful not to take on any more problems than you have to. What is needed is your careful, systematic study and analysis of the proposed purchase before rushing into buying a going business.