Is it better to buy an existing business or launch a startup? The answer may depend on your goals. However In general it is better to buy a business than to start one from scratch. The reasons are varied. First of all buyers often underestimate the true cost of establishing a business. Let’s take a simple retail business for example. Before opening the doors a buyer must
- Find a location
- Negotiate a lease
- Pay for the buildout
- Purchase furniture, fixtures and equipment
- Purchase inventory, marketing and advertising material
- Interview and hire employees
- Establish vendor relationships
- Obtain licenses and permits
- Invest a considerable amount of their time and labor
(never free)
Once open, the new business has to build a loyal customer base. Most startups don’t show a profit until year two or three. During this time the owner is supporting the business instead of the other way around. The total expense of getting to the point of success will typically be more than a buyer would have paid for a successful established business.
Another reason to buy instead of startup is the high failure rates of new enterprises. Statistics show that by year four 50% of startups are no longer operating. Established businesses with a track record have a much lower failure rate.
Buying a business gives you a functioning and profitable business from day one. You avoid the headaches of a startup but still have the ability to mould the business to your own personality. You are less likely to see your business fail and your investment lost.
There are of course reasons to start up a business. If you have a unique idea and the funds to see it through you may need to build it from scratch. But in general it is better to take over after someone else has done the heavy lifting.
Anthony John Rigney is a successful Business Broker in Jacksonville Florida. Anthony is also the owner and founder of Quorum Business Advisors, LLC. He works with business owners and buyers to accomplish a smooth transition of ownership. For more information visit him online at www.qbusinessadvisors.com or call today at 904-725-7677