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. 

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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.

The Pros and Cons of Buying an Existing Business

Buying an Existing Business

Here are the Pros and Cons

Are you thinking about buying a business? Learn about the pros and cons of buying an existing business before you move forward.

Buying existing businesses

A record number of businesses were sold in 2019. That number continues to trend upward from previous years as baby boomers seek to retire and millennials begin to realize there might be limited exit options for their would-be unicorns in a public market focused on profit….

The economy is still doing well. Most businesses that sell are financially healthy, with cash flow to pay off the acquisition price.

While buying an existing business definitely has its advantages, there are also a few downsides anyone looking to buy should be aware of. The more you understand the nuances of buying an existing business, the more successful you'll be. 

We want to help you understand the pros and cons of purchasing an existing business. Keep reading to learn more. 

Advantages of Buying an Existing Business

It's not easy to start your own business. Statistically speaking, most startup businesses shut their doors within five years. 

Which makes buying an already established business that's proven to be financially successful a smart move. The hard work has already taken place to get past liftoff and into the atmosphere of profitability.

Access to a Network of People

When you buy an existing business, you get access to an existing network of people who can help guide you and your business including:

• Loyal customers

• Vendors

• Suppliers

• Employees

Also, if the existing owner has established relationships with banks, printers, advertisers, and insurance companies, it's much easier than trying to embark on those relationships from scratch. 

Established Brand

Branding is an essential part of marketing. Without loyal customers, there is no viable business. 

Buying a small business with a well-established brand name makes it easier for you to reach out to attract new business. 

Fewer Financial Surprises

There's a lot of risks a new business owner takes. But when the seller already has everything in place, that means the business is already operating and pricing has already been established. 

There's less of a chance you'll get caught in a money pit because the seller should already have provided you with the financial documents. 

Also, the sale is structured so you can cover all your expenses including the debt service and your salary. 

The Disadvantages of Buying an Established Business

While the business may already be well-established, that doesn't mean a few changes may be necessary. It's also difficult to fully comprehend what changes are needed until you've already purchased the business. 

However, here are a few red flags to look out for:

• High employee turnover

• Outdated or unreliable equipment

• Unreliable suppliers

A business that carries existing debt or has cash flow issues also will mean there's hard work ahead of you to get back into the black. And it's not always easy to walk into an already established business and try to change the rules. 

The Brand May Be Established But Suffer from PR Issues

While it's great to buy a business with an already established brand name, if the company suffers from PR (public relations) issues, you're inheriting a potential disaster that is now your job to clean up. 

Even a new owner may not be enough to change the minds of unhappy former patrons. Make sure you buy a business with a positive reputation. 

A Cheap Business Isn't Necessarily a Good Thing

If a business seems inexpensive it's usually not a good thing. An expensive business means it's doing financially well and has a good reputation. 

A cheap business may mean it has a bad reputation or a good or service isn't performing well in the market. Always ask yourself if it's worth the money and the work you'll need to put in to ensure a company stays successful after you've bought it. 

Start Getting Matched With Acquisitions and Make Some Inquiries

The best way to get going on buying your first business is to start looking at opportunities and reach out to connect with the seller or the seller’s business broker if you’re serious about any specific opportunity. As a buyer, at no cost to you, you can set up your profile and acquisition preferences today on BizNexus and we’ll start showing you opportunities from our $1 billioin+ inventory platform that makes sense for you.

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.