Starting or Buying a Small Business

Starting VS Buying a Small Business

Successful Business Options

The decision to buy an existing business or start one from scratch comes into the mind of a new business owner very early in the evaluation process.

Both options contain their share of challenges and opportunities. Entrepreneurs meet this fork-in-the road at a very early stage in process of starting a new business.

The choice is not considered in businesses being started by inventors of new products and services where a new business start up is required.

During economic downturns many unemployed begin considering putting efforts into starting a business of their own to create a new source of income. When income generation is the primary motivator this decision to start or buy a new business becomes paramount in importance.

Business Purchase

Addressing the obvious first, cost can be a major factor when purchasing an existing corporation or small business. Business sellers will charge for existing customers, good will in the community, location and dedicated staff.

While these are all intangibles and unlike hard assets as buildings, inventory and cash on hand; they are much more expensive and time consuming to build from scratch with a brand new business.

If the existing business has done a great job with customer service and employee motivation then the business could be worth what they are asking.

History has shown many businesses being sold without full disclosure prior to handing over the keys. Akin to buying a new house and then finding out a month later that the plumbing and electric wiring all needs replacing, businesses for sale have withheld information regarding outstanding loans or large customers who have already mentioned they would be leaving.

Determining why a company is being sold is the most important aspect of the purchase.

The owner wanting to retire may be a safer bet than a young owner who wants to move out of state. When a business purchase is being considered as secondary decision should then follow; deciding between purchasing a freestanding business or a franchise.

Start Up Business

Starting a business from scratch in most cases can be less expensive than buying an existing business.

Often a star up business can be run from the home until it grows to a size which will support the cost of an office lease.

A new business also affords the capability to make changes quickly to adapt to industry changes or consumer demand. Making changes in an existing business may take time to create buy-in with existing employees or investment partners.

A new business will often require developing new skills, creating a base of customers, writing sales letters and advertising content. In addition, new businesses have a higher failure rate than purchased businesses with years of experience behind it.

A new business does carry risks with it, but can be even more rewarding because of the intense development of creativity required to create success from the ground up.


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