Are you thinking about starting your own business? Consider whether buying a business might be a better fit for you.
The decision to purchase an existing business is an enormous step in your career. While there is merit and a certain sense of accomplishment in starting your own business, buying a business mitigates a great deal of risk, helping to eliminate many of the potential pitfalls, stressors, and financial obstacles of a start-up. If your expertise or passion lies in optimization, growing what already exists, and building upon a business’ current operations, then the following information is essential for you as an entrepreneur.
1. Cheaper, Faster, and Safer
Buying an existing business can be a great way to avoid the up-front costs, initial marketing, training, and start-up losses associated with starting a new business from scratch. You may also be able to inherit pre-negotiated contracts with existing suppliers and avoid buying new equipment that is needed to operate the business.
Buying an existing business can also be faster, since the initial waiting period for permits, agreements, contracts, and other aspects of a business start-up have already been taken care of by the founder.
Finally, it can be safer to buy an existing business with an established client base and proven positive cash flow as opposed to starting a new business and spending months or even years building your business towards profitability.
2. Profits from Day One
For some businesses it can take years before they begin to generate profits. Buying an existing business with an established track record of profitability allows you to skip this risky and time consuming stage and allows you to focus on growing the business and creating efficiencies from day one. Moreover, when you buy an established business, you will be able to analyze performance from previous years, which can give you a sense of your business’ expected profitability.
3. Established Market Presence
An existing business comes with an established market presence, which will allow you to capitalize immediately. An established brand will be complete with all names, copyrights, and websites associated with it. This gives clients, suppliers, lenders, and other contacts confidence in your business that they are unlikely to have with an unknown start-up.
4. Trained Staff and Established Processes
Perhaps one of the greatest benefits of buying an existing business is the experienced staff and proven processes that you will inherit. Often when starting a business, entrepreneurs will need to go through a trial and error period in order to find the right employees and appropriate business processes, which can be stressful and costly. When you buy an existing business, you will be able to skip the majority of this process. Experienced staff members can also help you transition into your own business, while preventing any dip in activity associated with the ownership changeover.
5. No Added Competition
Buying a business is a fantastic way to enter into an industry without adding to the competition. Instead of struggling to secure clients, purchasing an existing business allows you to also purchase market share. This can be especially beneficial when entering into a highly competitive industry.
Financing a start-up can be one of the biggest hurdles for those looking to go into business on their own. Banks may be more open, however, to financing an existing business, as they have a proven track record and existing cash flow. Furthermore, it may be possible to receive financing from the seller of the business, further increasing your ability to finance an acquisition.