Buying vs Starting a Business: Which is the Better Option?

Buying vs Starting a Business

Which is the Better Option?

Wondering whether to buy an existing business or start a new one? Read through to learn why the former is the superior alternative.

Buying vs starting a business

Are you wanting to own a business but don’t know where to begin? So many questions and options such as, “what should my business be?” or “should I buy a business or start one?”

These are all good questions! Let us help show you why buying vs starting a business is really the better option!

Starting a Business

While starting a business can seem like an enchanting idea, it poses several major disadvantages as opposed to buying one.

When you start a business, you must build it from the ground up. Starting from scratch is definitely not for the faint of heart. Here is a list of just a few of the difficulties you will face if you start a business from scratch:

• Creating and keeping your customer base

• Acquiring a patent if it’s for a product or novel idea

• Hiring employees

• Marketing your business

• A large amount of capital is available

• Not having an established reputation 

Starting a business is very risky. Statistics show that about 2 out of 10 start-ups will fail. 

When you are starting a business, you have to create your own value for your product or company, whereas part of buying a business that is already established includes purchasing their already established value.

Buying a Business

If you decide that starting a business is not the route you want to take, the better alternative is buying an already established business. Here are several advantages to buying a business:

• Known brand—having a known or popular identity

• Existing infrastructure

• Employees who are trained

• vendors who are already established

• Existing funds

• The business model that is proven and established

• Existing customer base 

Check out this video if you are looking to buy a website, eCommerce, an app, or SaaS Company

Buying vs Starting a Business

When buying a business you have a proven business model because customers are familiar with the business or product and are purchasing already. They have established customers.

Starting a business requires you to produce a proven business model as if it were a hypothesis. “My customer wants my product because of ABC.” This is what you are trying to prove.

Buying a business means you have trained employees meaning you can start immediately generating sales because you don’t have to waste your time on the training and hiring process.

These already trained employees will help your business to run smoother with their expertise and prior experience.

Starting a business means wading through piles of applications and interviews and then taking the time to train each of the employees you hire. You also will have to factor in a learning curve and be prepared to have a slow start when it comes to generating sales.

One Final Thought

When considering buying vs starting a business, if you really have your heart set on starting and developing your own, we suggest you first buy an established one to get a feel for how a business is run.

Once you have bought a business and have taken a few years to turn a profit and understand the nitty-gritty of the business world, then maybe consider starting your own.

While starting a business can at first seem inspirational or enchanting, we promise you will soon become disenchanted. When that untrained employee sets the kitchen towel on fire, you will think back to this post and wish you had instead bought your business.

Want to learn more about owning your own successful business? Contact us today to see how we can help. 

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

3 Practices to Get Your Business Ready for Sale

Get ready

To sell your business

Are you looking to sell your business? Read through to learn a couple of things you'll need to do to get it ready for the big sale.

Let’s get your business ready to sell

A record number of businesses were sold in 2018. Four percent more businesses were sold that year than in 2017. 

Selling a business is a lot like selling a home. It's something you've put a lot of blood, sweat, and effort into, and it takes time to prepare for an exit that makes it all worthwhile. 

More often than not, your employees can't come with you once you've sold your business, and that alone can make selling a business rather bittersweet and difficult when it comes to making sure they stay on board with a new owner so you can get through a successful exit.

If you're wondering how to begin to get a business ready to sell, we can help with that. Keep reading to learn our three ways to start the process of selling a business. 

1. Get a Business Ready to Sell by Boosting Your Brand

The more brand awareness you have, the more valuable your company is to potential investors. Here's how to boost your company's brand:

Appearance

All your marketing and branding efforts should have a consistent and attractive look to them. 

Visibility

Customers and buyers alike should be able to find your company online. Make an effort to get your website ranked first on searches. 

Integrity

Clean up any problems your business has going on. That includes any scandals, lawsuits, or scam reports. 

Potential buyers want to know you and your business are honest. 

Followers

You can't just post every once in a while on social media. You must have an active profile and accumulate followers. 

The more customers who are loyal to your brand, the more successful your business becomes. And buyers are purchasing not just your office space and products or services, but your customers as well. 

2. It's About Timing and Knowing Your Worth

Get an appraisal done on your business. You'll not only know the real worth of your business but prospective buyers will want one done anyway. 

But selling a business is all about timing. While you may think you need to sell because your business has legal challenges, is facing bankruptcy or is losing too much money, you'll also attract buyers eager to cash in on your distress. 

It's better to sell when your business is doing well. It's appealing to investors and you walk away with more money in your pocket. 

3. Keep Costs Down

The more costs you can cut, the more profits you'll make. And the goal as a seller is to show buyers a revenue trend that's ticking up instead of down. 

Take a look at your current expenses and find ways to either reduce them or eliminate them entirely. Often, all it takes is a quick phone call to your vendor to ask for a better deal. 

Cutting costs can help show buyers that the business is improving rather than slowing down. 

Get Help

Another way to learn how to get a business ready to sell is to partner with the right business broker. We can help match you with the best professionals for you and your unique business when the time comes.

We'll also help explain the process and be there with you every step of the way. Click here to learn more. 

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

Buying an Established Business: Why It's Better Than Starting a Business

Starting A Business

Better to buy one than startup

There are so many small businesses today and they come with many risks. Buying an established business is a better option.

For this reason, many entrepreneurs choose to buy an established business instead.

There are many advantages to buying an established business and, in many cases, it's a better option than starting one.

With an existing business, the company's financial documents serve as a road-map for optimizing the business moving forward.

However, purchasing an existing business gives you a head start.

There are different ways to start a business. Many savvy business owners prefer to buy an established business over a startup.

Here's why:

Starting a new business is not easy. Did you know that 50 percent of small businesses fail in the first 5 years?

For this reason, many entrepreneurs choose to buy an established business instead. Franchise opportunities, for example, end in failure only 17 percent of the time.

There are many advantages to buying an established business and, in many cases, it's a better option than starting one. Read on as we explore the top reasons why purchasing an existing business is a great investment.

Existing Cash Flow and Customer Base

The hardest part of starting a new business is establishing a customer base. Without a steady stream of customers, your cash on hand is minimal.

By purchasing an existing business, you can leverage the prior owner’s hard work. The company has already established itself in the marketplace and there is brand recognition from day #1.

There are processes and procedures in place for servicing customers and delivering a product. Perhaps most important is lessons learned from existing employees and customers. You can learn from the previous owner's failures and so you won't be likely to repeat their mistakes.

Using Historical Financial & Performance Data

Another advantage is inheriting years of financial & performance data. In a startup, you're jumping head-first into the unknown with little existing data to guide you. Everything is a "first," and you just need to make fast, repeat decisions with your gut and hopefully a really, really smart management team. But that cannot ever replace experience.

With an existing business, a the company’s financial documents serve as a road-map for optimizing the business moving forward. You have a baseline and existing trajectory to work off with improvements, and you can evaluate the company’s operating expenses to reduce waste and increase the profit margin.

This financial snapshot serves many other purposes. With less uncertainty, your business is more likely to secure loans, and you may be able to attract other investors with an updated business plan.

Purchase at a Discount

If you're buying at a multiple of inefficient cash flow level, you are likely to acquire business assets at a significant discount. This is especially true for startups that are overpaying too many employees, or purchased a lot of capital equipment.

Social Media Footprint

Nearly every business in the United States has a social media footprint. It is not easy to acquire a robust following or steady web traffic on a blog.

However, purchasing an existing business gives you a head start. Now, you can leverage off of the prior owner’s Facebook or Instagram account.

In addition, there are e-mail marketing lists to inherit. You can start running digital promotions immediately after acquisition. For a startup, prospective customer information has to be collected the hard way, from scratch.

A Recap of Buying an Established Business

There are different ways to start a business. Many savvy business owners prefer to buy an established business over a startup.

The primary reason is taking advantage of all the time and money the prior owner put in. Acquiring business data like financials and e-mail marketing lists go a long way.

Buying an Established Business: Why It's Better Than Starting a Business

There are so many small businesses today and they come with many risks. Buying an established business is a better option. Here's why.

Starting a new business is not easy. Did you know that 50 percent of small businesses fail in the first 5 years?

For this reason, many entrepreneurs choose to buy an established business instead. Franchise opportunities, for example, fail only 17 percent of the time.

There are many advantages to buying an established business and, in many cases, it's a better option than starting one. Read on as we explore the top reasons why purchasing an existing business is a great investment.

Existing Cash Flow and Customer Base

The hardest part of starting a new business is establishing a customer base. Without a steady stream of customers, your cash on hand is minimal.

By purchasing an existing business, you can leverage the prior owner’s hard work. The company has already established itself in the marketplace and there is brand recognition from day #1.

There are processes and procedures in place for servicing customers and delivering a product. Perhaps most important are lessons learned from existing employees and customers. You can learn from the previous owner's failures and so you won't be likely to repeat their mistakes.

Using Historical Financial & Performance Data

Another advantage is inheriting years of financial & performance data. In a startup, you're jumping head-first into the unknown with little existing data to guide you. Everything is a "first," and you just need to make fast, repeat decisions with your gut and hopefully a really, really smart management team. But that cannot ever replace experience.

With an existing business, the company’s financial documents serve as a roadmap for optimizing the business moving forward. You have a baseline and existing trajectory to work off of and improve, and you can evaluate the company’s operating expenses to reduce waste and increase profit margin.

This financial snapshot serves many other purposes. With less uncertainty, your business is more likely to secure loans, and you may be able to attract other investors with an updated business plan.

Purchase at a Discount

If you're buying at multiple inefficient cash flow levels, you are likely to acquire business assets at a significant discount. This is especially true for startups that are overpaying too many employees or purchased a lot of capital equipment.

Social Media Footprint

Nearly every business in the United States has a social media footprint. It is not easy to acquire a robust following or steady web traffic on a blog.

However, purchasing an existing business gives you a head start. Now, you can leverage off of the prior owner’s Facebook or Instagram account.

In addition, there are e-mail marketing lists to inherit. You can start running digital promotions immediately after acquisition. For a startup, prospective customer information has to be collected the hard way, from scratch.

A Recap of Buying an Established Business

There are different ways to start a business. Many savvy business owners prefer to buy an established business over a startup.

The primary reason is taking advantage of all the time and money the prior owner put in. Acquiring business data like financials and email marketing lists goes a long way.

BizNexus -Learn More From Our YouTube Playlist:

BUSINESS ACQUISITION

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.