One question emerging entrepreneurs often ask themselves is whether to buy an existing business, like a turnaround business or a discount business, or if they should start a new one. It is an important question to ask and there are pros and cons to buying a turnaround business. To identify the best strategic approach, we've developed a few questions prospective business owners can ask themselves.
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. In the case of buying a cheap business, purchasing can offer a great leg up to a business owner with little invesment, and a high potential for reward.
How much am I willing to risk? When buying a discount 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. And if the business is low priced, what a great opportunity for acquisition that an owner can really make their own.
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 and can be considered a cheap business or a discount business. 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 purchase everything 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, buying a turnaround business may be a better option. The opportunities offered by a discount business or turnaround business for putting an owner's strategic plans to work is a great way to stretch your entreprenerial muscles!
To learn more about buying a turnaround business, schedule a free consultation with one of our brokers today or sign up here to receive our turnaround business listings by email.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her working experience has 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 her Master’s Degree in Global Interactions from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high life!