Most people who wish to dive into the business world have two options to start a business. Either they can start one from scratch or buy an existing one.
To start a business, one may need to consider critical initial startup steps and the risks involved in the business. A new business may require marketing, new employees, investments, and gaining a loyal customer base. However, if you buy an existing business, it is already established and comes with a reputation.
Investing in an existing business is a better ideal if you do not wish to go through the initial startup stage. It is better to skip the risky starting phase and take over an already existing business with profits and ample cash flow. Moreover, there is a customer base that you may expand with your own ideas and strategies. With all the significant pieces in place, you can focus on improving the business profits in innovative ways.
Why Consider Buying an Existing Business Instead of Starting a New One?
The best use of your resources may not always be in brainstorming startup ideas. There are plenty of businesses for sale that may fit your business ideas and general requirements. Moreover, you may revamp the business while leveraging its current profits and customer base. Here are some reasons to consider an established business instead of starting from scratch.
Low risk and easy secure finance
Starting a business is always a risk as it may not be an instant hit. This will prevent lenders from investing in your business and establish well. Most of the lenders feel an existing business is a bigger profit and consider lending to a reliable venture. As the business is already doing well in the market, it will generate a good income.
The buyer will have incoming capital even if a lender is necessary to acquire the business. Moreover, there will be physical proof of previous financial gains, revenues, and statements to consider. This will help in assessing the future prospects and success of the business. There are fewer factors that may lead to financial losses to the existing business. Hence, this is a very low-risk investment for the buyer and lender.
Recognized brand value
Before buying a business, you will assess the company’s reputation and market value. This will help you understand if it is a recognizable brand that may be fruitful in the long term. There will be enough data to learn about prover sales, records, websites, and trademark features. A supplier and customer are always reluctant towards a new business. So, all these add up to the brand value, and customers are more inclined towards your business.
Constant income and profits
New business has to go through several phases of building customers to gain some profit. This may take months to years and require a lot of capital. You may require new equipment, stocks, material, and staff in the initial stage to start making a profit. It may get overwhelming to manage everything in a new business. On the contrary, an established business will already be out of this hard sail and generate enough profits. Besides, with the right due diligence, you will understand your business will perform well and bring in constant profits.
Customer relations access
An existing business will already have a chain of a loyal customer base. So, you will not need to work around different tactics and offers to generate an initial customer base. This established customer base will save you time in accessing the data of an extensive network. Moreover, you will have an existing base of suppliers and marketers who already understand your business. Your business will have enough established relations to keep it running smoothly.
Besides, the company will already enjoy a good market presence and benefit from it. This will, in turn, improve the brand value and have a larger reach. You may spend your energy on gaining new customers and finding ways to attract more.
More focus on growth and new ideas
As your existing business investment will no longer be in a startup phase, you will have the freedom to get creative. You have a tested field in the market and existing customers to make quick sales and profits. With trained people and relations in place, you will have more faith in new ideas before taking a final plunge. The experience and capital will help you widen more business scopes.
You may need some minimal changes and improvements in equipment and staff; however, there will be more opportunities to grow. The pre-existing framework and protocol will also take away the additional initial work that may come in a new business. Therefore, you can prioritize to focus on new ideas and take the business a notch higher.
Ample liquid finances
A new business requires resources, equipment, and staff in each working stage. This includes the initial phase that may not be profitable at all. An existing business will have an established profit cycle and enough returns. Therefore, you will be free to pick the areas that need more financing. Your business will generate income and provide finances to put back into the business. With this steady income, you will not worry all the time and feel the frustration of not having enough money for more profits.
Trained and experienced staff
Each business requires a specific set of skilled hands and brainpower to keep it running. Starting a new business will need new employees and train them as per your work requirements. This requires a significant time and effort to get everything working in order. When you buy an existing company, you will already have an experienced team that is aware of the business.
This will save time, and the experience of the employees may even come in handy. It will help you transition smoothly into the new business environment and suffer fewer hiccups with the management. Moreover, you will have an easy time implying new ideas and development strategies.
Comparatively less work
While there are many dedicated companies such as EmpireCrafter.com which handle done-for-you business establishing process, this still requires time, effort, planning, and putting all the resources in different places. You may need to juggle finances, marketing, and new stuff together, which is a lot of work. Therefore, an existing business is a better idea as it is less work in terms of initial phases. With the trained staff and customers, you will not need to work on pre-existing areas of the company.
What to Consider Prior to Buying an Existing Business?
Before deciding to buy a particular business, you need to narrow down the choices. Look for a particular type of business that you are knowledgeable about and have experience in managing.
Besides, consider factors such as you and your team’s skills, the company’s size, cost analysis, profits, and geographical location. You may also need to keep in mind the employee wages and taxes to keep the business running.
Your hunt for an ideal business should be thorough and meet all the industry requirements. You may find a business for sale in a newspaper, online ads, and or at business listing marketplaces such asBuySellEmpire.com.
Ansh Gupta, CEO of BuySellEmpire, on what to look for while buying an existing business.
While considering any business to buy, start by performing a thorough trademark search in the country of your jurisdiction to avoid any trademark issues with competitors.
Check the company’s accounts, performance numbers, background, and reputation to ensure no licensing and legal issues. Take a look at all the contracts to cover the legal history.
Ask sellers about future prospects, reasons for sale, and how to maintain the business.
Considering legal aspects, make sure “hold harmless and indemnify” clause is in your contract to protect yourself from the seller’s past actions. Lastly, consider the insurance needs and the existing coverage of the business. Lastly, make sure the asking price is relative to the current market trends.
At BuySellEmpire, we always do a thorough due-diligence to list only those businesses that we feel would provide a good return to new buyers.
Buying an established business wins over starting from scratch. Starting from scratch may give you more freedom but comes at a cost. However, an existing business is easier to manage and has more returns. Consider all the factors and prerequisites before buying an existing business. You may take some time to assess various business aspects before venturing into it completely.