Why buy a business rather than start one?

We read the wild success stories of entrepreneurs like Mark Zuckerberg starting a business in a dorm room and not too many years later becoming a multi billionaire. Certainly the grand scale of this type of success story gives us all pause to think about our own great ideas for a new product or expansion of an existing product. Before quitting your day job and committing your life savings to drive down the start up road to be the next billionaire, understand for every Mark there is road-kill littering the highway with failed startups. So, if you are sitting at your corporate desk job looking at the wall and thinking about a huge change, take time to look at existing businesses for sale.

The costs of buying an existing business are generally lower than starting from scratch. The opportunity to take over ongoing contracts or long term customers can give a buyer needed cash flow from the very start versus the start up customer acquisition cycle, product delivery and collections. An existing business gives a buyer the business infrastructure including employees, fixtures, furnishings and computer systems. Most important, you have the opportunity to learn from the sellers both the good and the bad of their business. Sellers of existing businesses are generally open to sharing the path they took to success and the detours that failed to deliver revenues and profits, in a start up you have to make your own way that can be costly. Take advantage of a seller who is willing to stay on to train you as well as transition employees and customers, they can be an invaluable resource.

A warning for those of you thinking about buying a business, beware of the fluffy ads posted by many business brokers. The ads may not tell the whole story, you need to deal with a credible business broker who understands the operations and finances of the business they are selling. In addition, you need to do your homework by joining trade associations and visiting businesses in your area of interest. The more knowledgeable you are upfront, in conjunction with an informed business broker, will pay off in your quest to purchase, operate and expand a profitable business.

“Becoming your own boss always involves a risk. When you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a start up.” IBBA

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