Should I buy a business or start a business? Owning a business may be a dream, but the process of taking an idea and turning it into a viable organization is sometimes more of a nightmare. There is a lot of effort involved and most startups will not find enough funding to get off the ground. Many others do not make it past their first year in business. These facts do not mean that anyone should give up their entrepreneurial plans, they just need an alternative path to reach the success they desire. Should you or your company buy a business? Are you a private equity firm looking to expand your portfolio?
Why not buy a business that’s already successful?
One method that offers more security is taking over the reins of an established company. When you buy a business, you own something with a proven track record of success, and it’s easier to prove to lenders that the company can make a profit. A business acquisition provides the new owner with a company that already has brand recognition and a client list. If you’re a corporate executive, looking to buy a business, wouldn’t it be easier to put your years of experience and education to immediate use, rather than starting from scratch? A new business offers no track record of success, whereas an established business does. If you’d like more information on how to value a business, please check out our page on business valuation. We do provide business valuations for buyers who need to know what to offer on a business.
Ever think about acquiring another business to grow yours?
An existing business owner should also consider the possibility of expansion through acquisition. Acquisitions help to increase product lines, customer bases, and expand the menu of services you can offer. Buying another business may also offer cost-saving synergies that are realized over time. A merger with or the purchase of a competing company instantly eliminates the risk they once posed, increases client lists, and much more, without any undue effort. Through higher aggregate cash flow levels and the effects of multiple arbitrage, the potential value of the company can be boosted immediately, and the acquisition sends a strong signal to potential clients of the company.
What’s best for you?
Weighing the pros and cons of starting a new company or buying an existing one is an important decision. You should consider the time it will take to determine the potential market for your product, the dollars and time it will take to establish a new brand, and the employees need to hire to make your idea a reality. Even seemingly simple decisions like developing and registering a logo, a company name, and basic marketing plans could take months or longer to choose and there are no guarantees they will appeal to your target customer. Another benefit of buying a business is that you can will immediately have the guidance of the previous owner and usually an existing, trained staff that makes it possible to continue the daily operations without interruption. You’ll be able to make changes and improvements of course, but the foundation has already been established. For an individual buyer, if you’d like a list of small businesses to buy in your area, check out BizBuySell. For larger buyers, either strategic corporate buyers or private equity firms, please email us below and we will put you on our distribution list.
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GregKnox
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Greg Knox, CFA has spent his 20+ year career in investment banking, private equity, a hedge fund, and institutional trading, at institutions as Deutsche Bank, T. Rowe Price, and Wachovia. After his MBA at Cornell...(click Greg's picture to read more)
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David Smoot has 20 successful years working for Fortune 500 companies in sales and finance and owning his own small businesses. His leadership roles included sales, finance, managing multi-million dollar product launches, training new ... (click David's picture to read more)
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Mr. Thomas “Jay” Lennon is an Air Force veteran, combat aviator, and distinguished leader with 26 years’ experience leading multi-million dollar projects, finance, and organizational transitions, inside and outside of the.... (click Jay's picture to read more)
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Lance Hupfeld has over 25 years of experience in sales and business development management. With a broad array of valuable experience, Lance has deep knowledge in healthcare consulting... (click Lance's picture to read more)
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