Buy a business vs. Start up. Which is right for you?

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June 26, 2014
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June 26, 2014

Buy a business vs. Start up. Which is right for you?

Whether you are looking at working for yourself or investing in a new and exciting business venture, all of the choices can make it confusing.

Although start-ups may be exciting and relatively inexpensive at first, there are a lot of unknown factors and launching a new business takes incredible effort and time to build momentum.

With an existing business, someone else has already done much of the work required to make them successful and you know there is a marketplace for the product or service.

POINTS TO CONSIDER

Customers – Although you will work to expand the client base, there are already tried and true customers that like the business and keep coming back. Start-ups have to go out and find their customers from the beginning one at a time over a period of years.

Suppliers – Existing businesses have working relationships with reputable vendors that provide them with quality products and services. Many start-ups have to search out and form relationships with new vendors.

Risk – With an established business, a lot of the risk has been reduced from the enterprise. It already exists and has proven itself successful. Start-ups may appear to be cheaper, but their success is unproven and the total cost in time and money can be very significant.

Cash flow – An existing business is at a point where the owner can probably take a salary, cover debts, and reinvest in the business. A start-up is just that…starting up. Most start-up owners struggle greatly for the first two or three years while trying to establish their business.

People/Staff – The greatest benefit of buying an existing business can be the experienced staff that comes with it. These are trained individuals that have helped to make the company a success and can run it in your absence. With start-ups, you are the only staff. If you get sick, so does the business.

Your Focus – With an existing business, you can immediately focus on the running and improvement of the business. With a start-up, you spend more time focusing on starting up the business and requiring all the necessary elements to make it functional.

The Brand – You are buying the brand name of the company and all of its established clientele, goodwill and community connections. This is a great foundation for attracting new business or making “cold” sales calls.

Proven Business –  A financial track record that you can take to the bank to secure financing. Start-ups lack this which makes acquiring working capital difficult.

In summary, acquiring an existing business can significantly increase your odds of being a successful and satisfied business owner.

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