When starting a business, you have two options: buy an established business or launch a completely new business.
While there are benefits to launching a new business or backing a successful company, buying an existing business has numerous distinct advantages that you should consider.
Here are reasons why you should opt for buying a business for sale, rather than starting your own business from scratch.
Why You Should Acquire An Established Business
Branding Has Begun
An established business doesn’t require massive brand building, as is the case with startups. Instead of spending your limited resources and quality time on branding, you can channel those efforts towards other core aspects of boosting the business.
Buying a business is fundamentally investing in a brand. While it may need some refining and strengthening, the brand is out there and familiar with customers and to a larger segment of your industry.
In addition, you don’t have to build new relationships with suppliers from scratch. When you buy a business, you will benefit from the already established suppliers who are familiar with working with your staff. Meaning, the suppliers will be more willing to issue credit and be more flexible in negotiating good dealings.
Determining the potential of a startup requires extensive research and analysis of market trends and making crucial projections based on your market research. This process can be tiring and risky because it is like planning your weekend based on the weather report.
When you buy an existing business, you can examine real results and analyze its financial statements before making predictions for the future. Real results will give you a clearer and realistic picture of what products to invest in and what to avoid.
More Financing Opportunity
It is easier to get funding for an established business than a startup. Most lenders consider the history of a business before approving loan applications.
Depending on the financial history of the business that you buy, you can easily secure funding from a financial institution. Although it might be difficult to get a loan from a traditional bank, any business that has been open for years has a better chance of obtaining credit and higher interest lending products.
This is especially true if you are acquiring a business in the area you are seeking funding in. For example, if you are looking for a business for sale in Houston, a local financial institution will likely give you a loan as you are driving business into the community.
Quicker Cash Flow
A startup business will need months before you can start reaping sustainable profits. However, when you buy an established business, you can start operations immediately by leveraging the existing systems, procedures and clientele.
In other words, you can begin bringing in cash right after taking over ownership of the established business. In addition, an established business has already identified its target market, and thus there are fewer unknowns. You can develop a more accurate strategy of succeeding or scaling up the business because the company has more known quantities than uncertainties.
Buying a business with more than two employees is a profitable approach. Since some of the key people in the business will prefer coming along with the business, you won’t have to spend capital on recruiting and training new staff.
Moreover, these employees are a great asset to the business because they understand the business model and are well accustomed to handling the business’s existing suppliers and customers. In fact, building a productive team from the ground up can be time-consuming and costly.
Established Systems and Procedures
Even experienced businesspeople can make mistakes when implementing the right systems and procedures that can make a business operational. But, when you buy an established business with systems and procedures in place, you can initiate operations and implement new projects with ease.
Alternatively, you can redefine the existing procedures and systems for better results. The business’s current systems and procedures will allow you to jump right in and start recouping your investment as soon as possible.
Lower Risk Factors
According to U.S. Census data cited by the New York Times, 51.2% new businesses fail within the first five years of operation. That shows that a business that has been operational for over five years is, at the very least, a successful business model.
This statistic also shows that startups potentially face several challenges from the onset as compared to established businesses. When you buy an existing business, you have room to maintain the pre-existing track record of profit before you carefully start optimizing your operations to boost productivity and increase those profits. There is a lower risk in buying an existing business than investing in a startup.
You can spend an incredible amount of time in developing beneficial relationships with clients, suppliers, vendors and a building technology platform when you launch a new business. However, when you buy an existing business for sale, all these aspects of the business have already been handled for you. This allows you to focus on expanding and growing your business right away, without wasting the quality time on the basics.