6 Reasons to Buy a Business Instead of Starting a New One
Do You Want To Buy A Business?
Instead of starting a new one
Startup, startup, startup. These days anybody and everybody who thinks of entrepreneurship think of starting something from scratch…. Make the pitch deck, get the funding, get the ego-stroking valuation you can tell all of your friends and family about inside and outside of startup land…
A recent study, showed nearly 20% of small businesses fail in their first year, 30% fail in their second year and about 50% of small businesses fail after five years in business. Statistics like this make starting a new business a scary proposition.
On the other hand, you have an improved chance of succeeding when you buy an existing business. Here are some reasons to consider buying an existing business instead of starting a new one.
Financials Already Exist
One of the major advantages of buying a business is that financials already exists. An existing business can easily develop an accurate financial estimate or gauge future earnings. However, new businesses have to rely on pro forma budgets where they forecast revenues, cash flow, taxes, and expenses in advance.
Cash Flow is Predictable
Furthermore, existing businesses have immediate and anticipated cash flow. When you buy an existing business, you have estimated revenue for the payroll, operations, taxes, and debt service to rely upon. However, if you start your business from scratch, you have to wait for several months before you have the adequate cash flow to cover these costs.
Established Suppliers and Credit Lines
In addition, existing businesses have established suppliers and credit lines. You can easily get a loan or line of credit. However, if you start your business from scratch, it will take quite some time before you establish a relationship with any supplier. Also, you will find it hard to secure loans or supplier credit.
Established Customer Base
As a new business, you need to find customers for your new startup. You have to run a series of promos, discounts, referrals, and offers. Besides, it also takes time to build a loyal customer base. On the other hand, existing businesses have an established customer base. Once you buy the business, you only need to focus on the existing customer base, deliver quality services, and improve customer experience.
Licenses and Permits
Before you can operate as a business, you need to be granted licenses and permits by the body overseeing your sector. This may take quite some time, weeks or even months. In fact, you may even be denied a license to sell your products if you fail to meet certain criteria. However, existing businesses already have all the required licenses and permits. Once you purchase the business, all licenses and permits will be transferred to you.
Ease of Finance
Finally, an existing business already has a history, mode of operation, as well as a proven track record. If you need business financing, you can base your lending decision on actual results and not just estimates and calculated guesses. Thus, making it easier to secure business financing from banks and lenders.
To Recap it all for you
6 reasons to buy an existing business instead of starting one. There are several risks involved in becoming your own boss. When you buy an already existing business, you are taking a calculated risk which eliminates several pitfalls and failure potentials that come with starting your business from scratch.
Planning to buy a business?
Buying a business is a huge decision. You need to ensure that you get it right. Contact us today to know more about BizNexus. Our expert team will be available to speak with you and discuss the options available to you. A fantastic experience awaits you.
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