Why is Buying an Existing Business Better Than Starting From Scratch?

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Think of buying one instead

If you want to become a business owner, it's tough to decide on whether buying an existing business or starting from scratch is better. Here's what we think.

Buying an existing business

Have you been thinking about starting your own business?

Do you know buying an existing business is sometimes more profitable than starting from scratch?

Entrepreneurship through acquisition is a current business trend. It is also one of the most exciting ways to begin your business empire.

When you are buying an established business that has cash flow, your entrepreneurship dreams are only a step away. But there are important questions to ask and ways to proceed that are vital to set in motion before you buy.

The questions are vital because their answers help you decide if you should proceed with buying or walk away to the next business on your to-do list.

Buying an Existing Business

When you buy an existing business, you are selecting an establishment that has already endured good times and maybe some bad times too. But it is still in business, and that is what is important to understand.

Businesses that produce income can be steady and solid. Bankers, investors, customers are all easier to attract and keep if you redevelop the existing business with smart moves and steadying ways.

But there are some important steps you need to take before you write your check to buy the business. 

Important Steps in Buying an Existing Business

It's important to know why they are selling the business. Sometimes the owners of the existing business want to move on to the next great thing in their lives. But their answer may tell you they are having legal and financial issues.

It may even reveal a pending lawsuit.

The business owners may have problems with vendors or employees. These issues are relevant facts you need to know for your business analysis and decision.

Determining the Price of the Business for Sale

Ask the current business owner how they determined the price of their business for sale. How the business owner determined their price is important due to the following:

  1. If the business owners cannot substantiate their current asking prices through their financial records you have a decision to make. Also, you may negotiate a price reduction.

  2. If they can substantiate their asking price through their financial records, make sure you are looking at the past two to three years.

The financial records of the existing business you might think shows dull but steady growth. Perhaps the financial records reveal it is more flashy with great financial ups and downs. You need to understand what works and doesn't work before you sign the dotted line and buy the business.

Statistics and Funding for Businesses for Sale

Every year, there are more than 500,000 businesses sold and bought. The number of businesses that are listed for sale each year is expected to go up as the baby boomer generation retires.

One of the most important things you need to ask yourself is how are you going to finance your small business purchase? There are great financial options in the market, but you have to know where to look.

Entrepreneurship Through Acquisition

You now know you are going to move forward with buying an existing business. It's important to find a small business that fits your life and your skill sets. If you manage your new business right, you can keep the businesses' old customers, vendors, employees, and more.

When all your questions have been answered, and your financing obtained, all that waits is implementing your unique business skills. Your extensive research, knowledge, and business skills will help you grow and develop the business of your dreams.

Business growth can lead to a business empire if you want. Log in and let's start building your business dream together.

 

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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.

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Tips on Selling Your Business With a Business Broker

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How to Buy a Franchise: 5 Best Practices for Buying a New Franchise Opportunity