Becoming a Business Owner: 7 Key Benefits of Buying a Business

When it comes to buying a business, 90% of potential buyers fall through. It's an extraordinarily high number, and there are various possible reasons.

People become obsessed with the idea that the business might fail, or find too many risks. The truth is though, no business is perfect.

However, becoming a business owner of an already established company can be far better than starting your own in many ways. Don't back out because of some trivial reasons — it's time to go for it.

If you're wondering about all of the advantages of buying a business, here they are! 

1. It's Low-Risk Compared to Starting a Business

When buying an existing business, there's generally less risk.

If you're starting your own business rather than investing your time and money in an existing business, the risk factors can be pretty huge. Many businesses fail fast and unfortunately, when starting a business, it's very hard to predict if it will be successful or not. Very promising business can flop.

An established business has already been through the risky first couple of years and made it out the other side. Presumably, they've already met a lot of their business goals and are generating a healthy profit.

By buying an existing business, you're skipping the initial risk period. 

2. There Are Established Relationships Already

Regardless of what the business offers, whether it's a service or a product, there are usually established relationships with clients or customers.

They already know the business works for them, and they're ready to use them.  

Although you'll want to continue to grow the business by going out there and finding more clients and customers to welcome into the fold, starting off with that base can be extremely helpful. There's no need to struggle for a few weeks or months as you try to find people to help — your starting base is already there. 

3. You Might Have a Solid Staff Team

There's probably a staff team already working for the business. Takeovers can be tricky in that not everyone is always happy about them, but if you put your best foot forward, it's likely to go smoothly. 

After all, this staff team is likely already invested in the business. 

The staff team will have been there for a while, which means they already know what they're doing. This can cut training and hiring costs, since if you need to hire anyone new, it'll be far fewer people than if you had started a business on your own.

New business owners developing a good relationship with an existing staff team is vital and will pay off in the long run.

4. Learning Something New

When buying a business, you might know the business and financial world well, but not the industry you're coming into.

For example, you might be entering the pet industry or the gaming world, but have no idea about either of those things.

That doesn't mean you're going to be a bad owner! It just means you're going to learn something new and gain experience in a new industry, which is invaluable.

Let the staff teach you about everything you need to know while you impart business wisdom. 

5. You Still Have Creative Freedom

One thing that scares new business owners is that they'll have no creative freedom. By coming into an established business, they assume it's set up a specific way, and they won't be able to change anything. Understandably, that can be frightening to those who like to make their own mark on things.

This, however, isn't true!

Staff and clients alike will welcome improvements. This isn't to say you should come in and change everything in one shot, but you'll be welcome to put your own stamp on the business if it improves it.

You likely already have ideas if you went ahead with buying the business, so don't be shy to do it — although it's always wise to seek feedback first. 

6. It's Less Work

In general, it's less work at the start. If you own multiple businesses or have another job, this simple fact might be what persuades you to buy an existing business. 

You can skip out on:

• Hiring and training staff

• Working to establish the business

• Finding those initial clients

• Designing the website from scratch

• Experimenting with what works for the business

You can make changes to all of these things, of course, but the solid foundation being there will make a huge difference. 

7. It Likely Has an Established Reputation

Not only will it have a staff team and established clients, but it might also already have a reputation in that industry!

If the website is drawing in a good number of hits a month, or the client base is big, this is likely the case. No need to build the business up to be highly respected when the respect is already there — all you need to do is maintain it by carrying on with what they've been doing and putting your own mark on things. 

Becoming a Business Owner This Way Might Be the Smart Choice

Becoming a business owner can be daunting in any scenario. However, buying a business from scratch involves a risk period and a lot of time and effort investment that buying an existing business doesn't. 

If you've been afraid to buy a business, it might be time to take the leap. Don't look for the perfect business — look for the business that's well on its way to being so, so you can push it for the final few steps!

Looking to buy a business? We can help — let us match you with one today. 

Search Fund Model Diversifies Away From MBA

The Search Fund Model

-Very interesting article recently on Entrepreneur highlighting recent private equity trends and the increasing appetites of family offices for the traditional search fund model. Towards the end of the article, Atta Tarki begins to address an issue that I wish he went more deeply into (hopefully your next article Atta?): The fact that more entrepreneurs who don’t fit the traditional mold of the recently graduated MBA with investment banking or private equity experience are getting into the search fund game.

In the early 2000s, 50 percent of searchers would start their search within a year of graduating from an MBA program, but that number now has dropped down to 25 percent. At the time it was also incredibly rare for searchers to not have gone to business school at all, but 19 percent of searchers now ….. start a search without getting an MBA.

What is Search Fund?

When I first engaged with the search fund model back in 2007, it was still a relatively unknown, inaccessible model. The idea of backing an inexperienced, newly minted MBA to identify, acquire and run one company was insane to most investors outside of a small group of tightly knit investors known as the “search fund mafia.” For the entrepreneur, being limited to such a small pool of tightly knit investors put the aspiring searchers at a very clear disadvantage when it came to negotiating terms, or simply having enough capital out there to back this type of investment for a growing community of aspiring ETA entrepreneurs.

Why Entrepreneurship Through Acquisition?

Family offices, and the explosion of interest in entrepreneurship through acquisition over the past decade, have changed everything, and it’s great to see the pool of investors getting deeper with each passing year as more investors become familiar with the model (and with the returns typically associated with the search fund model).

Something to note here: -One grievance I still have with the general discourse out there when it comes to the discussion of this specific ETA model is that everybody loves to rave about the great returns on investment, but the data referenced is typically for the investors, -not the entrepreneur. I’m not trying to say the search fund model isn’t a great model for the entrepreneur as well as the investor, -it is. But to hit it big as an entrepreneur with the way the search fund investment is typically structured, the search funder more often than not really has to knock it out of the park with the traditional time + performance-based equity model and liquidation rights associated with search fund investments.

For me personally, I ultimately wound up pivoting mid-search away from the typical search fund target in lieu of less proven opportunities and eventually acquired a larger piece of equity in a smaller deal that had had some clear P&L mismanagement leading up to my acquisition. Seven years later, with the help of my investors, we got that company to a point where it was ready for a viable exit.

Final Take on The Search Fund Model

The search fund model presents an amazing opportunity for the motivated entrepreneur, but it can also be a sort of acquisition gateway drug for newly aspiring ETA enthusiasts, ultimately leading to other forms of acquisition entrepreneurship, -like tapping the SBA for up an acquisition loan up to $5 million to buy a small business on your own, and focusing negotiations on seller financing and earnouts, particularly in this new environment. search fund investments

Hand picket for you - read on…

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.

What Is Entrepreneurship Through Acquisition? Your Guide to the Benefits

What is ETA?

Your guide to the benefits

Have you heard of entrepreneurship through acquisition but are unsure of what this means? Read through here to answer this and to learn why this is a great choice.

Entrepreneurship through acquisition

Many Americans are growing tired of working in corporate America. Here, they are spinning their wheels on a fixed salary and far too many hours. To make matters worse, their wages are barely increasing on a yearly basis.

Fed up, millions are responding to an entrepreneurial spirit and starting their own business. In fact, 27 million Americans are either starting or running a new business.

Pursuing an entrepreneurial opportunity is a wise decision. The profitability rate recently surged more than 25% in a single year.

Read on to learn about entrepreneurship through acquisition. Explore the benefits of acquiring an existing business over starting a new one.

What Are the Challenges of Starting a New Business?

Many entrepreneurs decide to start their own businesses. While some find success, this path is likely to see significant challenges.

The most obvious challenge to overcome is that you are starting from scratch. You do not enjoy the luxury of an existing brand.

There are no loyal customers or equipment to leverage off of. Also, policies and processes have yet to be developed.

You do not have existing employees or subject matter experts. Instead, an employee training program needs to be developed and provided to all new workers.  There may be significant barriers to entry in the marketplace including established competitors.

What Are the Benefits of Entrepreneurship Through Acquisition?

Entrepreneurship through acquisition occurs when buyer(s) purchase an existing business. This includes pursuing franchising opportunities.

In this scenario, an entrepreneur finds a business for sale and pays a price to acquire it. This may come in the form of a lifelong small business owner who is retiring and looking to sell.

There are many benefits to this approach because the transaction may include many different items. For example, you may be acquiring the company’s machinery and supplies. Perhaps the company has popular social media accounts that you will take control of on day one.

Perhaps the greatest benefit is that an existing business has an established revenue stream. You do not have to stress over generating profit as it will be coming in from the start.

How Do Entrepreneurs Find an Existing Business?

Once you decide to forgo starting a new business from scratch, it is time to find an existing business. However, this is easier said than done. Businesses do not typically put up a for-sale sign on the storefront.

The good news is that there are online resources to pair entrepreneurs with business owners looking to sell. There are algorithms that help match your passions with existing businesses and franchise opportunities. Once financing is secured, you can get a business appraised and make an offer.

Glance through featured businesses for sale listed recently on BizNexus Marketplace

Wrapping It Up

The American Dream is alive and well. Now is the time to seize your opportunity and become your own boss.

Instead of working uphill with a brand new business, you should consider purchasing an existing business. This way, you can inherit an established brand and revenue stream.

If you want to learn more about entrepreneurship through acquisition, you can start your search for the next business opportunity by signing up to BizNexus.

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.