Almost half of Americans have considered starting a business before. If you’re among them and plan to make the leap soon, you may wonder whether you’re making the right decision. From creating a business plan to optimizing cash flow, there’s a lot to do… and a lot that could go wrong.
Luckily, there’s a solution: buying a business. Read on to learn the ins and outs of buying a business vs starting one (and why it’s a worthwhile trade-off).
Is Buying a Business Better Than Starting One?
Many business-minded individuals logically think that starting their own business is a good idea. This makes sense, especially for those who have a passion they want to showcase in stores.
If you love making your own clothes, a fashion boutique sounds like a fun startup idea. If you have interesting and useful business software, you may be excited to begin a SaaS business.
However, what sounds ideal in theory may not go well for you in practice. Over two in three startups never deliver a positive return on their investments, meaning that they lose money on expenses and turn no net profit. This is likely why only 30% of small startups make it through their first five years of operations.
This makes sense when you consider the challenges of starting a business. It’s not just about the product that you’re passionate about. It’s not even primarily about the product you’re passionate about.
Starting your own new business requires forward-thinking planning. You’ll need to come up with a budget, business objectives, long-term and short-term goals, marketing strategy, and long-term financial management plan. You also will need to collaborate with suppliers and vendors, hire employees with experience and expertise, and form partnerships in your chosen industry.
This is a recipe for stress at best and failure at worst. Overhead expenses and understandable difficulties during the planning processes mean that even great products can fail. It’s not worth it for many people.
What Are the Advantages of Buying a Business Rather Than Starting One From Scratch?
If you’re interested in the business world, there’s luckily an alternative to starting a business from scratch. You can buy a pre-existing one.
There’s less risk associated with buying a business than there is in starting one. It’s already been established, and people already know of the business’s existence. It will be easier to find buyers because they’ll already know what goods and services they can expect from you.
Branding Made Simple
Branding is the voice that you give to your brand. It means establishing a logo, creating an easily identifiable mission, and using color combinations to create a seamless brand image. It also means ensuring that your brand becomes widely known as knowledgeable and reputable.
When you buy an existing business, someone else has already done this for you. You don’t need to hire graphic designers and spend weeks determining what kind of brand voice you want. You can instead get right down to business.
Pre-Existing Cash Flow
Buying a business is also called an ‘acquisition,’ and this name makes sense when you consider that you’re acquiring everything from the previous owner. Part of this is the cash flow.
When you start a new business, you’ll have a lot of overhead costs and no income. This means that you’re going to need to work hard only to break even.
With a pre-established business, though, you also purchase an existing cash flow. This can serve as your business’s livelihood, keep it afloat, and fund expansion.
A Predetermined Business Model
Creating a business model can take months, and even then it may fail. When you acquire a business, though, you’re also buying a proven model that’s ready for immediate use. It’s been test-driven and tweaked to an optimized state.
You can rest easy that the business will begin to profit quickly because of this pre-existing model. Of course, you can adjust it over time to accommodate growth and new product lines, but you’ll have a strong starting point.
Is It Easier to Start a New Business, Buy an Existing One, or Buy a Franchise?
We’ve already established that buying a business is more effective, economical, and reliable than starting your own. This makes it easier and faster since you can generate a profit with a pre-existing business model. But there’s also a third option to consider: franchising.
When you buy a business, you buy the rights to all of its processes. It’s your business, and you can do with it as you see fit. This means adding new products, changing business models, updating cash flows, and expanding to new service areas.
Franchising is a bit different. You only buy the rights to use the business logo, name, and model. As a franchisee, you’re stuck following the rules that the larger company imposes. You can’t sell new products or update existing processes.
Many people are passionate about a specific good, service, or product that they want to sell. Acquiring a business means that you can add these products to the pre-existing catalog. You have the power and control to expand product lines and offer more things.
If you’re business-minded and want to create your own rules and thrive, a franchise business can feel limiting. You may feel stunted or as though you’re at a dead-end.
Buying a franchise is a simple process, but it’s not that much easier than buying a business. Sure, there’s a bit more paperwork involved in the latter, but it’s well worth the control that you get over your services.
Beyond the Basics of Buying a Business vs Starting One
Now that you know the ins and outs of buying a business vs starting one, it’s time to realize your dream and turn a profit ASAP. Gulfstream Mergers & Acquisitions is committed to helping you find and purchase the perfect business to meet your needs and goals.
We’re excited to turn your vision into a reality and learn more about your precise passions and objectives. Contact us to learn more about our services and how they can help budding businesspeople thrive.