Advantages and Disadvantages of Buying a Small Business

Starting a small business can be an exciting time with the potential for great success. However, starting from the ground up is not your only option; you can also purchase an existing and established small business. This may seem like the more attractive option for some, but it is important to consider all of the Pros and Cons of Buying a Small Business and a few of them are discussed below.

Advantages

1. Everything is already set up

A lot goes into starting up a business, but most of the start up work has already been done when you are purchasing an existing business. You will be acquiring a business where there are suppliers in place, staff is trained, and procedures and protocols already exist. This can make the transition much smoother while you adjust to the new business. This seems much more attractive when compared to starting up your own business because you will have to invest a lot of time and money in order to get to this point.

What Is Fair Market Value – What does this really mean?

A public company is one whose shares are freely traded on the stock exchange. Because the shares are traded on the stock exchange, the price of shares can be easily ascertained online. This is not the case with private companies. They do issue shares and have shareholders, but these shares are not traded on public exchanges, thus, making it much harder to determine the value of these shares. However, determining the fair market value of these shares on a regular basis is important when it comes to dispute resolution, taxes, obtaining insurance and a variety of other circumstances.

Fair market value

Fair market value is essentially the price an asset would sell for on the open market. However, certain conditions need to be met for the price to be considered fair market value. First, the buyer and seller must be well informed about the asset. Next, they must be acting in their own best interest and this must be free of undue pressure. Finally, the transaction must not be too rushed so that the parties have time to make an informed decision.