Working at Transworld, it is not uncommon to find yourself in conversations with professionals about their latest business concept. We love to hear what ideas Colorado’s visionary entrepreneurs are churning in their mind, but it is also not uncommon for us to extol the benefits of buying verses starting a business. This is not only because the virtues of buying an established business are many, but also because the failure rates of startups are pretty abysmal (by year 5 nearly 60% of startup businesses will fail). In the following discussion, we will outline the benefits of buying a business over starting one.
Established Concept. The benefits of buying an established business are pretty big, especially compared to the downfalls of a startup. The main benefit of buying a business is that the concept is established and proven to work. You would be hard pressed to find any startup concept that can say with full confidence that their concept will definitely work in their market and generate revenue for them.
Proven Cash Flow. You know what else an established business has? Yes, that’s right cash flow! An established business has been in operation for a given amount of time and has customers in place. How many customers do startups have when they begin? None. Whose job is it to find them? Yours. Whose job is it to add cash flow to a startup when there is none? Yours.
Staff in Place. Most people have gone through some sort of hiring process in their life. Think back to how involved this process was and the amount of waiting and number of rejections you may have dealt with. Now imagine hiring people for your own business - it will be costly, lengthy, and resumes can only reveal so much. An established business will already have employees onboarded that are familiar with the business and ready to keep working.
Established Vendor & Customer Relationships. An established business will have vendors, suppliers, and customers already in place. They know your company and its reputation in the community. With startups, sourcing vendors, and setting up a supply chain can not only be a very difficult process, but if not done well it can be the reason you become a failure statistic.
Buying a business is all about buying into a company’s proven concept, processes, customer base - you know what you’re getting into and there is simply a lot less unknown items to deal with. Startups are just that - they’re new, unproven, a mystery! And while the idea of building something wholly your own and new is appealing to some, what about the part where you put all your time and money into the business and it still isn’t working. You can really nip the many difficulties of a startup in the bud, by buying a business.
For more information on how Transworld - Rocky Mountain can support you with the purchase of a business, please visit our website or schedule a free consultation with one of our brokers today!
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.