Frequently Asked Questions

22. Is it better to buy an existing business or start a new one?

It depends. An existing business should have established procedures and processes, operations, reputation, as well as a customer base which can result in a high price tag. It should also have a positive cash flow. If the business is lacking in these areas, that is problematic. Also keep in mind that an existing business may also have "baggage" which can cause problems for the future owner. Existing business typically sell at a premium.

A potential buyer should consider the return on the investment in an existing business in comparison with the return on starting a new business. A new business can start with a clean slate. While it may take less money to start a new business than it does to purchase a going concern, it takes time and can be very difficult to build the business. The new business also has no track record on which to base decisions. Significant working capital is often required to grow a new business.

The bottom line is that every business purchase situation is different and should be carefully evaluated on its own merits.

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The Arkansas Small Business Development Center is funded in part through a cooperative agreement with the U.S. Small Business Administration through a partnership with the University of Arkansas at Little Rock College of Business and other institutions of higher education. All opinions, conclusions or recommendations expressed are those of the author(s) and do not necessarily reflect the views of the SBA. It is the goal of UALR to eliminate discriminatory harassment and to promote equal opportunity regardless of race, gender, color, national origin, sexual orientation, age, religion, veteran’s status, or disability.