Newsletters

Newsletter - August 2025

Buying a Business in a Challenging Economic Environment

Buying a business during challenging economic times requires careful consideration and due diligence.  The media currently tends to focus on negative business news, however its not all bad and in fact now could be the very best time for buying a business.

There’s a very sound business saying, “that a Quality Business will always sell no matter the economic conditions”.

Despite business confidence being down, Tabak is still experiencing strong buyer interest.  Yes, there exists a cautious nervousness, but conversely there are many buyers who see the opportunity in purchasing an established and profitable business that will comfortably weather the looming storm clouds.

With that in mind, I thought it timely once again to focus on the key advantages of buying an established business.

Skipping the start-up stage              

Within a few years of starting up, the majority of small businesses have closed for one reason or another.  According to Statistics New Zealand, only 58% of startup businesses are still trading three years later, and only 31% were still in business after 10 years.  This means buying a well-established existing business gives the buyer some assurance they’re buying a tried and tested business model that works and has survived the highs and lows of a business cycle.          

Inheriting systems, customers and image    

A good business should come with tried and tested processes and systems that allow daily, weekly, monthly and annual tasks to be carried out as efficiently as possible.  You will save time, money, and energy by not having to develop these systems yourself, and you’ll quickly get a good grasp of the day-to-day running of the business when learning existing systems.  In addition, you’ll be able to improve the systems if needed, with the groundwork having already been done for you.

A major advantage of buying an existing business is that you inherit its market, or customer base – particularly if you buy a well-known company.  This means you don’t need to pour as many hours and dollars into marketing and advertising as you would with a new business.

Along with a recognised brand and business image, you’ll also inherit a good reputation.  This is a key point to be aware of when considering buying an existing business.       

Other advantages of buying an existing business       

While buying an existing business usually involves a greater initial financial outlay than starting a business and growing it gradually, there are some peace-of-mind advantages that come with the expense. 

Knowing that you’re gaining established relationships, purchasing proven products, and will have regular sales coming in each month gives you peace-of-mind.  This also frees you up to focus on growing the business.

By inheriting the previous owner’s business plan, you’ll have a clear goal and path mapped out, giving a sense of direction and organisation.  Of course, this doesn’t mean the business plan is set in stone, but it gives you a foundation to build on. 

Finally, good financial records are almost as important as good sales.  Your business circumstances might change, requiring you to apply for finance or credit from new suppliers.  If you have a strong financial track record, these will be granted with minimal hassle.  Without the backing of good results and records, you’ll need to find other ways to prove your creditworthiness and might not get the credit you need.

All up, there are many advantages to buying an existing business.  It’s always important to be sure the business you are considering is right for you, and it is crucial that you learn as much as possible about its financial status, history, value, and strengths and weaknesses before you commit to the purchase.

Kevin Kerr; Partner
Tabak Business Sales, Tauranga