Buy
A Business
Five Reasons To Buy A Business Instead
Of Starting One
1.)
There Is A Track Record You Can Examine -
As opposed to the unknowns (and high rate of failure) of a
starting a business, an existing company has a real track
record that you can examine. You will be able thoroughly examine
the financial records, tax returns and leases of an existing
business.
Also,
you will be able to more accurately judge the strength of
the competition since the company you are considering has
dealt with them on a daily basis.
The quality
of the location and traffic of an existing establishment is
known and proven over time - as opposed to a start up were
the quality of the location is at least somewhat unknown.
In addition,
as you study a business, it’s possible that you will be struck
with new income generating ideas, niches that have been overlooked
or weaknesses in the competition that can be easily exploited.
Since you are looking at an actual business or competitor,
ideas (as well as facts) can be assessed in much more realistic
terms.
If you
are just "thinking about" starting a business (meaning
it’s just a vision at this point) than everything is much
more speculative and theoretical - and making the correct
decisions will be much harder.
Sometimes
the most valuable information you get from a seller relates
to their mistakes - the things they tried that didn't’t work
- even though they sounded like great ideas at the time. You
can benefit from their experience and avoid some of their
mistakes.
2.)
Immediate Cash Flow - When you buy a business that is
up and running it will be producing income for you immediately.
When starting a business it can take 12-18 months before turning
a profit. Even an educated guess as to how much cash you will
need at the start to live on and run the business is still
a guess.
With an
existing business, your need to borrow funds for operating
expenses should be less, and if you do need to borrow, the
guesswork is eliminated because you know how much cash the
business is generating.
3.)
The Best Possible Training Is Available- Usually the current
owner is happy to give his successor advice and insight based
on his years of experience. The current owner has a vested
interest in your success.
If he
has financed part of the sale price then obviously he wants
(and needs) you to succeed. But even if you paid cash, the
business is something he has poured his heart and soul into
for years so he will still be very interested in helping you
succeed - he doesn’t want his pride and joy to fail even after
he has left.
There
is no way to have this valuable (and free) training available
to you if you start a business from scratch.
The specific
length and type of training the seller will provide may be
negotiated as part of the overall sales arrangement. As an
example, the seller may commit to stay and work with you for
6 months and then be available for consulting for 12 months
after that.
And don’t
overlook the fact that when you buy a business you inherit
trained, knowledgeable and experienced employees.
To customers,
your employees are the face of you company. It’s hard to overestimate
the value of the insights and experiences these employees
already have, not to mention the importance of the relationships
they have built over the years with your brand new customers.
4.)
Financing Is Often Easier - More often than not, a small
business purchase is financed by the seller. There is no stronger
vote of confidence in a business than when the current owner
is willing to finance a significant portion of the selling
price - and thereby remain dependent on the business’ continued
success for years to come. If you plan on starting a business,
you will have no financing options as attractive seller financing.
(Note:
even in the best case scenario, you should be prepared to
pay down 30% or more of your own money).
5.)
There Are Always Good Businesses For Sale! - All the above
leads to an obvious question:
If
a business is successful and the owner believes it will remain
so, why would he sell?
That is
a valid question that the skeptic in you should ask each time
you look at a business.
Some businesses
for sale aren't worth buying - at any price. But many successful
businesses with a bright future are put up for sale every
day. The most obvious reasons for this are the health and/or
retirement of the owner.
Other
businesses are put on the market because partners have decided
to dissolve their partnership and go their separate ways or
get divorced. The reason for the sale may be as straightforward
as the owner is bored and wants to do something new with their
life.
And then
there are those best case scenarios where the owner is selling
in order to pursue other successful ongoing ventures - winning
is a habit and often the most attractive companies are being
sold by an owner with other successful companies that require
their full attention. The reasons for a business being put
up for sale are as unique as the individual selling them.
There
are great opportunities out there right now with owners who
have valid reasons for selling and who are willing to provide
training and financing. Making the decision to buy a business
can put you in a profitable position sooner and with less
risk than almost any startup opportunity you may find.
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