So you want to be your own boss. There are certain pros and cons to both buying and starting a business. If you do a careful analysis you will learn what many seasoned entrepreneurs have discovered. The risk to reward ratio is tipped in your favor when you purchase as existing business. Starting a business of your own can pay great dividend, but its important to understand that the risk are significant. Most start up business will falter and eventually die. Purchasing the existing business reduce the entrepreneurs risk while creating opportunities for tremendous profit. There are some reason to buy a business instead of starting one.
Proven Concept: Buying an established business is less risky as a buyer already know the process or concept works. Financing a purchase is often easier than securing funding for a star up business for that very reason – the business has a track record
Brand: You are buying a brand name. The on-going benefits of any marketing or networking the prior owner has done will transfer to you. When you have an established name in the business community, it’s a easier to place cold calls and attract new business than with an unproven start up.
Relationships: With the purchase of an existing, you will have buying an existing customer base and vendor base that took year to build. Its very common for the seller to stay on and transition with the business for a short time to transfer those relationships to the buyer.
Focus: When you buy a business, you can be working immediately and focus on improving and growing the business immediately. The seller has already laid the foundation and taken care of the time consuming, tedious start up work. Starting a new business means spending a lot of time and money on basic item like computers, telephones, furniture and policies that don’t directly generate cash flow.
People: in an acquisition, one of the most valuable and important assets you are buying is the people. It took the seller time to find those employees, develop them and assimilate them into the company culture. With the right team in place, just about anything is possible and you will have as easier time implementing growth strategies. Plus, with trained people a place you will have more liberty to take vacation, spend time with family or work on other business venture. When startup owner’s independent contractors go on vacation, the business goes too.
Cash Flow: Typically, a sale is structured so you can cover the debt service, take a reasonable salary, and have some left over to take the business to the next level. Startup owners, on the other hand often strive at first. Some experts say startups are not expected to make money for the first three years.
