One question emerging entrepreneurs often ask themselves is whether to buy an existing business or start a new one. It is an important question and there are pros and cons to either decision. Prospective business owners need to ask themselves a few key questions.
How unique is my business idea? If the business plan is new to an area, there may be no businesses available for acquisition that would reasonably help a prospective owner to start their plan. On the other hand, the vast majority of small businesses are based on models that are known to work and could be altered to fit the new owners plan with less effort than starting a new business.
How much am I willing to risk? When buying a working business, a prospective buyer can more reasonably assume that the business will continue to be profitable if they know it has been in the past. There may be a great need for a new liquor store in a new part of town, but it may be risky to start a new store rather than acquire a liquor store that has proven revenue and an established customer base.
Could I use assets and the location of another business? Not all business sales are based on the cash flow of a business. Asset sales are sales of businesses where the assets of the company determine the sales price, and as such are usually significantly cheaper. Asset sales are a great way for an entrepreneur to get much of the build-out and equipment they need at a cost that is lower than if they were to do it themselves. This is also a great way to get into an in-demand location where open leasing spaces are non-existent.
What jobs tasked to a business owner would I enjoy doing? If a prospective business owner wants to control all aspects of starting a business, such as which equipment to buy, obtaining licenses and inventory, and setting up processes from scratch, starting their own business may be a good decision. If, however, they are more interested in running the business rather than setting it up, acquiring a working business may be a better option.
To learn more about buying an established business or to discuss current ownership opportunities, schedule a free consultation with one of our brokers...
Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master's Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.