Is Buying an Existing Business Worth the Money?

Buying an existing business has a number of advantages in New Zealand. To many investors, buying an existing business presents more excellent oppor...

  • Is Buying an Existing Business Worth the Money?
    Manish Khanna Image Manish Khanna

    Is Buying an Existing Business Worth the Money?

    • Wednesday 22nd of April 2015
    • Buying

    Buying an existing business has a number of advantages in New Zealand. To many investors, buying an existing business presents more excellent opportunities than they would find by starting a venture right from scratch before building or growing it gradually into a success story. Economically, buying a business makes sense on several fronts. One of the benefits is that the buyer inherits an existing customer base. The other advantage is that the buyer inherits the use of established business premises. The opportunity to buy a brand that enjoys universal recognition is too hard to resist. The network of suppliers and experienced staff are the other benefits.

    Avoid risks associated with Start-ups

    It is worth mentioning that buyers of existing business do not have to worry about the risks associated with the start-up stage. When building a business right from scratch, one has to deal with several problems. The start-up stage offers no guarantees in New Zealand. For example, a study undertaken a few years ago showed that it was nearly impossible for a business started in 2001 to survive beyond the first 3 years. In fact, only 58% of businesses started in 2001 were in operation by 2004. Only a third of such businesses managed to survive to 2010 and beyond, thus showing the almost impossible task a businessperson has with regard to start-ups.

    According to the New Zealand official government statistics, “…99 percent of all small businesses in the country have to put up with unexpected costs as well as a reduction in sales…”

    Tried and tested Business Model and Systems

    An existing business offers several guarantees that a buyer would never get with start-ups. For example, the buyer is assured of investing in a tried and tested model, especially if the business has lasted more than between 3 and 10 years where 70% of all start-ups perish in New Zealand. The paper work associated with start-ups disappears and are not the concern of any investor who sees the wisdom of buying existing businesses. An existing business offers guarantees regarding working systems, which would never be the case with start-ups. Inheriting existing staff means getting the opportunity to understand the operations much faster.

    The following types of export businesses have proven profitable for investors interested in engaging in exports thereafter:

    • Cheese, butter, milk powder
    • Edible offal and meat
    • Wood articles, wood and logs
    • Crude oil
    • Machinery
    • Beverages
    • Fruits and nuts
    • Fish
    • Glues, starches and aluminoids
    • Electrical machinery
    • Cereal preparations
    • Aluminium
    • Wool pulp

    No need to train staff

    Buying an existing business means avoiding the break that would be required to train new staff or understand the operations. Therefore, this provides the buyer with the chance to ensure that the business is able to achieve all its annual, monthly, weekly and daily tasks or objectives seamlessly. With a start-up, the owner has to take time while spending huge sums of money trying to build new systems. Everybody within the start-up understands very little of the systems and nobody can guarantee the success of any of the systems. With existing businesses, the efficacy of the systems is never in question.

    Existing customer base

    Buying a well-known brand or franchise gives the new owner the chance of inheriting an existing market or customer base. Since the existing customers already understand the business, the new owner does not have to do a lot to convince them that the venture’s strengths shall remain as they were, or undergo improvements. The trust that the existing customers have with the business does not diminish simply because a new owner has entered the fray, not unless he supervises massive changes that leave the customer base confused. The reputation that the business enjoys is worth looking into to avoid buying a business that elicits negative reactions.

    Unparalleled peace of mind

    In terms of finances, it costs more to buy an existing business. This is because the owner has invested plenty to ensure that the business does not suffer the death associated with most start-ups in New Zealand. However, in terms of peace of mind, buying an existing business has more to offer than investing in start-ups. The long-term contracts that an existing business offers with customers and suppliers make such an investment worthwhile. The fact that the buyer is obtaining established relationships, buying tried and tested products, while assured of regular business on an annual, monthly, weekly and daily basis offers the new owner peace of mind.

    Best regions for Buying Specific Types of Businesses

    The best regions for investing in businesses – buying businesses – include the following;

    1. Northland – renowned for its businesses that thrive in high value manufacturing and primary production
    2. Auckland – ideal for investors interested in buying businesses that specialize in high value manufacturing, food and beverage as well as ICT
    3. Waikato – the perfect spot for buying businesses that focus on high value manufacturing, infrastructure as well as food and beverage
    4. Bay of Plenty – perfect for tourism, horticulture, forestry and geothermal energy
    5. Gisborne – farming (grain, sheep and beef), wood-product manufacturing, forestry
    6. Taranaki – the country’s petroleum energy hub and a vital food processing center
    7. Hawke’s Bay – exporter of wine, forestry products, fruits, vegetables, , lamb and beef
    8. Manawatu-Whanganui – agricultural research and primary production
    9. Wellington – country’s capital city and ICT hub
    10. Nelson, Tasman & Marlborough – renowned for Greenshell mussels, wine and apples
    11. Canterbury – thriving innovative ICT and manufacturing as well as construction sectors
    12. Otago – specialized manufacturing, design, winemaking, superior wool production and tourism
    13. West Coast – tourism, mining and dairy farming
    14. Southland – perfect for food and beverage, high value manufacturing and oil/gas production

    Buying an existing business in New Zealand is all about using the services of reliable and reputable business brokers. Before that, it would be a great idea to visit the Business, Innovation & Employment ministry website, www.business.govt.nz, which it runs with the support of NTZE. Some of the most reliable and reputable business brokers include

    1. Switch Business
    2. Prime Business
    3. Tabak Business Sales
    4. Company Sales and Acquisitions Ltd
    5. ABC Business Sales
    6. NZBizBuySell
    7. Barker Business Brokerage
    8. LINK Business

    if you don't want to sell your business with the help of a business broker, then you can privately sell your business online with business2sell.co.nz, we specialize in business buying and selling industry and make sure that you get qulity leads/business interest from potential buyers for your business for sale opportunity.

    However, prior to buying any existing business, the investor has to consider whether it is what he wants to invest his money into before throwing money into such a venture. The price has to be just right for the buyer. Learning the financial status of the business is mandatory. Learning the history of the business is highly advisable. It is important for the new buyer to spend time learning about his business’ actual worth or value. The strengths and weaknesses of the existing business are worth learning prior to committing to proceed with the purchase.

  • Author Info Manish Khanna

    Manish Khanna is a serial entrepreneur, philanthropist and genuine Australian success story. In a decade he has built an online empire unlike any other. He is currently the Managing Director of more than 10 individual companies. These include the flagship Business2Sell which operates internationally in 6 countries. The others include CommercialProperty2Sell, Million Dollar Mansions, Netvision, BCIC Pty Ltd and Better Franchise Group, to name a few.

    With more than 21 years’ experience developing web applications plus very successfully creating, managing and growing start-ups, he is forging ahead to turn more of his innovative ideas into future success stories.