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What do you think: start a new business or buy an existing one?
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6 Answers
The answer to this varies from person to person and situation to situation.
For some buying an already running business is an ideal option as the business is already running and doing business which means that the idea has worked, it has existing cash flows coming in, step up is already their i.e. suppliers, contractors, investors and most importantly existing customer base.
But for some, buying a new business is a viable option as they have new ideas and have resources to start from the stretch. They are willing to take the risk but for that they need to be extremely careful. Do proper planning, consult experts and seek help from others who have already passed this phase. Realistic business planning along with proper allocation and utilization of funds is a must in order to succeed your small business.
"Business format franchises often provide a full range of services, including site selection, training, product supply, marketing plans, and even assistance in obtaining financing. Business surveys show that fewer than 20 percent of all franchised businesses fail. This is in comparison to a 60 to 80 percent failure rate for ALL new businesses started in this country each year." (http://www.buyingabusiness.com)
I think it may be best to buy an existing business or franchise.. I found some good ones on a few sites, but the easiest site to navigate was by far http://www.buyabusiness.com
Buying an existing business has one big benefit - you can look at historical numbers to value the business. That also means that the seller will understand the true value of the business, probably much better than you do. So if you do decide to buy an existing business, make sure you:
1. Treat it as a purely economic/financial decision, rather than an emotional/visionary one;
2. Negotiate hard and be prepared to walk away from the deal - the seller has a significant negotiating advantage;
3. Develop a post acquisition integration plan or checklist - post-deal failure rates are high; and
4. Assess whether you will continue to run the business "as is" or make some strategic change that will provide the business with serious leverage once you own it.
Good luck.
There are advantages and disadvantages to either, and off the top I'm tempted to ask a lot of questions such as, What industry? What kind of investment are you able to make, both in money and in time?
But I would start with where your passions lie: Are you a founder or a manager at heart?
I would personally prefer to start a business from scratch and see how it grows. But from my personal experience I know that starting is much harder than running something already started.
I've founded and run a company and am now raising a search fund to purchase an existing one. Founding a company was a great experience, but I'm ready to build a company to be a big one.
As MIT's Director of the Entrepeneurship Center told me, it's harder to build a company from 0 to $10M than it is from $10M to $20, but you create the same amount of wealth.
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