Many entrepreneurs dream of starting their business from scratch — growing their own idea and brand from the ground up. But working from scratch brings up several disadvantages that might prevent the business from taking off in the first place, including the challenges of establishing cash flow, hiring employees, constructing a customer base and marketing the new company.
If these worries overwhelm you, buying an existing business offers more advantages and security when you purchase wisely. You will take over a company already producing profit and with an established customer base and trained employees. All the policies and systems are in place. But it’s important to conduct due diligence and get to know the ins and outs of the business before buying. Also, know that you won’t be alone in the process with M&A experts to help you.
You should choose the business that’s right for you. Look to an industry you understand and consider what matches your experience and skills. Here are five advantages of buying an existing business over starting one.
1. You Buy an Established Business
When you purchase an existing business, you gain the benefit of their reputation and track record. The business has a customer base, suppliers and vendors. The physical and virtual locations are set up with all the equipment, furniture and fixtures in place. People instantly recognize the brand, and you gain the websites, copyright and trademarks associated with it.
Lenders, suppliers, customers and other contacts have an established confidence in your company that they would not have with a startup.
2. Business Relationships in Place
Besides gaining existing relationships with suppliers, vendors and clients, you also gain the benefit of having an established base of employees who each provide valuable skills and talents. You acquire business relationships with advertisers, insurance companies, banks and professional advisers.
If a few of these relationships are missing, it’s easy to network with the established contacts to gain more contacts in the network and grow the existing business.
3. Less Risk
You take on a big risk when starting a business from scratch. A recent study revealed that the failure rate for U.S. companies was over 50 percent and over 70 percent after 10 years. An established business has already established policies and a proven financial track record.
That financial history is available for you to see and study. You can analyze the highs and lows of business finances and judge how much profit it will generate, as well as how to best grow the business.
4. Avoiding the Money Pit
Be wary of falling into the money pit when you start your own business. It’s easy to fling your startup financing, should you be lucky enough to get it, at anything shiny that promises you profit. You make considerable investments up front. Buying an established business gives you more freedom to decide how to put money back into growing the business.
Rather than getting into extensive debt when getting started, it makes more sense to invest in something that has proven results. When you purchase an existing business, you can work with the lending institutions to establish a reasonable down payment and work on financing the balance. In fact, it’s often easier to get financing for an existing business than it is for financiers to take a risk on a startup.
5. Less Work and More Strategy
Starting a new business consumes your life and time. It’s easy to let that goal take over your life and health. You need to take that fact seriously since it’s easy to find yourself in a place of resentment after you’ve gotten started. It’s easy to unintentionally let other meaningful relationships and things and life go in the place of building a new business.
Purchasing an existing business means less risk and more strategy for you. Existing business practices are streamlined. Employees, vendors and suppliers know the ropes. You step in with all the data and details in place and focus on growing the business and accomplishing strategic goals. That leaves more time and focus for you to apply passion to what you’re doing and inspire those around you while enjoying life.
The pros outweigh the cons in buying an existing business, and when you do, it doesn’t mean you’re giving up your dream for making something of your own. In fact, you’re improving the odds of success and enriching your experience.
Schedule a consultation with Sun Acquisitions today to learn more about the advantages of buying an established business and jump-starting your success.