Are you thinking of buying a business? This comprehensive guide looks at the benefits and risks associated with business purchases, to help you make an informed decision. Whether you’re new to business ownership or are simply expanding your portfolio, it’s important to weigh up all the pros and cons before taking the plunge. So, what are you waiting for? Read on to find out more!
Starting Own Business vs. Buying a Business
When you’re considering launching a business, you may have thought about going the startup route or acquiring an existing business. Both have their pros and cons, so it’s important to evaluate which option is best for you and your situation. Below, we’ve outlined some key considerations for starting vs buying a business.
Considerations for Starting a Business
1. You’re in control of the business’ vision, culture, and values.
2. You have the potential to create something unique.
3. You can be profitable quickly if you have a solid business plan and execution strategy.
1. It takes a lot of time, energy, and money to get a business off the ground – and there’s no guarantee of success.
2. You wear many hats in a startup – from accountant to janitor – which can be overwhelming.
3. You may have difficulty securing funding or attracting customers without a proven track record.
Considerations for Buying a Business
1. An existing customer base and revenue stream – meaning less work on the marketing front.
2. Much of the heavy lifting has been done in terms of setting up inventory, staffing, etc. – so you can hit the ground running.
3. You can learn from the previous owner about what works and doesn’t work with the business.
1. It can be expensive to buy an established business – sometimes prohibitively so.
2. The current owner may not be willing to provide extensive training or support after the sale.
3. The business may come with baggage in terms of reputation or legal issues.
Considering Business Ownership – Why You Should Consider Buying an Existing Business?
There are many reasons why buying an existing business can be a great option for those looking to become small business owners. For one, you’ll have an established customer base, which can help you hit the ground running and start generating revenue right away. Additionally, you’ll likely have less paperwork and red tape to deal with compared to starting a new business from scratch. And last but not least, you can benefit from the expertise of the previous owner (assuming they’re willing to stick around for a while).
“A million companies have the latest and greatest thing you need to buy to make your business better” – Brian Will.
If you’re on the fence about whether to start a new business or buy an existing one, consider the following benefits of the latter option:
1. You’ll Have an Established Customer Base
One of the biggest benefits of buying an existing business is that you’ll already have a group of existing customers in place. This is especially helpful if you’re taking over a local business, as you’ll likely already have name recognition in the community. And even if you’re not taking over a local business, there’s still a good chance that some of the customers from the previous owner will continue using your services.
2. You’ll Avoid Many of the Pitfalls Associated with Starting a New Business
Starting a new business from scratch can be a daunting task. Not only do you have to come up with a great business idea, but you also have to acquire funding, obtain all the necessary licenses and permits, and build out your team. Additionally, it can take months or even years before your new business starts generating significant revenue.
When you buy an existing business, on the other hand, many of these hurdles have already been cleared. In most cases, the previous owner will have taken care of all the necessary paperwork and will have established relationships with vendors and suppliers.
Additionally, they should have systems and processes in place that you can quickly learn and put into action. As a result, you’ll avoid many of the pitfalls associated with starting a brand new business and instead be able to hit the ground running from day one.
3. You Can Tap Into The Previous Owner’s Expertise
In many cases, the previous owner of the business will be available to help transition things over to you once the sale is complete. This is especially helpful if they built the business from scratch and have intimate knowledge of all its inner workings. Not only will this make things easier for you in those first few months or years, but it can also help ensure that there is continuity in terms of quality and customer service.
4. More chances of business success
There are several reasons why you should consider buying an existing business. One of the main advantages is that there is a greater chance of business success. This is because established businesses have a proven track record and are more likely to be successful than start-ups. They also tend to have more customers and better name recognition.
5. Financial rewards
Another benefit of buying an existing business is that it is often easier to get financing. Lenders are typically more willing to provide funding for an established business than a new business with no track record. Purchasing an existing business can also save you time and money. You will not need to spend as much time and money on marketing and advertising to build up brand awareness. We’ll suggest you read the book by Brian Will “The Dropout Multi-Millionaire” for tips on how to save time, money, and energy to run a successful business.
So, if you are thinking about starting your own business, be sure to consider the benefits of buying an existing business. You might be surprised at how easy it can be to find success.
“Be careful what you allow in your brain. It will affect everything in your life” – Brian Will.
The Pros and Cons of Buying an Existing Business
You’ve been toying with the idea of starting your own business for a while now. But between the long hours and the high risk, you’re not sure if it’s worth it. After all, there are already so many businesses out there. Why not just buy one that’s already up and running?
Here are some of the pros and cons of buying an existing business compared to starting one from scratch.
The Pros of Buying an Existing Business
1. Less Risk
When you buy an existing business, you’re buying into a proven concept. The product or service has already been market-tested and there’s a customer base in place. This reduces your risk compared to starting a business from scratch, where you have no way of knowing if anyone will want to buy what you’re selling.
“If you can make future profits with no risk … do it” – Brian Will.
2. More Money
Because existing businesses have already established themselves, they can fetch a higher price than a startup. This gives you more money to work with from the start, which can help get the business off the ground.
3. Established Relationships
Another advantage of buying an existing business is that it comes with established relationships with suppliers, employees, and customers. This can save you a lot of time and effort that would otherwise be spent on building these relationships from scratch.
The Cons of Buying an Existing Business
1. Less Flexibility
When you buy an existing business, you’re buying into someone else’s vision. You may have to make changes to fit your own goals and objectives, which can be difficult if the business is firmly entrenched in its current way of doing things.
2. More Debt
Unless you have the cash on hand to pay for the business outright, you’ll likely need to take out a loan to finance the purchase. This means more debt for you to pay off, which can be a burden if the business isn’t as successful as you hoped it would be.
3. Hidden Costs
There may be hidden costs associated with buying an existing business that you didn’t account for in your initial budget. For example, the previous owner may have taken on debt that you’re now responsible for paying off or there may be environmental cleaning required before you can move in. Be sure to do your due diligence before making an offer so you know exactly what you’re getting yourself into.
4. Less Control
As the new owner, you’ll have less control over how the business is run compared to if you started it from scratch yourself. This can be frustrating if you want to implement your ideas but are unable to do so because of pre-existing contracts or other commitments made by the previous business owner.
The 5 Biggest Risks of Buying a Business
When you’re looking to buy a business, it’s important to be aware of the risks involved. Buying a business is a big investment, and there are a lot of potential pitfalls that you need to be aware of before you leap. Here are the 5 biggest risks associated with buying a business:
Brian Will, a famous entrepreneur and author of the book “The Dropout Multi Millionaire” writes in his book:
“Be careful buying stuff, and remember it’s a depreciating asset. The more you buy, the faster it drops in value, and you can never get back what you spent. Your stuff will all eventually be junk anyway”.
1. You might overpay for the business.
When you’re looking at businesses for sale, it’s important to have a clear idea of what the business is worth. It’s easy to get caught up in the excitement of buying a business and end up paying too much for it. Make sure you do your homework and get a good sense of what similar businesses have sold for in the past so you don’t overpay for the one you’re interested in.
2. The business might have hidden liabilities.
When you’re buying a business, it’s important to do your due diligence and make sure that there are no hidden liabilities that could come back to bite you later on. For example, if the previous owner failed to pay taxes on the property, you could be on the hook for those back taxes when the tax authorities come knocking.
It’s important to have a lawyer look over any contract you’re considering signing so you know exactly what you’re getting into before you commit to anything.
3. The business might be in decline.
This is a risk, especially with brick-and-mortar businesses. Online businesses have an easier time staying relevant by constantly changing and evolving with technology but businesses like restaurants or retail stores can easily become obsolete. When considering buying a brick-and-mortar business, be sure to do your research on the current state of the industry as well as the specific location where the store is situated.
For example, malls are struggling across America due largely in part to online shopping becoming more popular each year. However, certain luxury brands are still doing well because people are willing to pay more for quality service or items. Knowing these kinds of things ahead of time can help prevent you from investing in a declining industry.
4. The business might be too dependent on one or two key employees.
If you’re buying a small business, there’s a good chance that it will be reliant on one or two key employees who know intimately how everything works. While this can be an advantage ( they can help train you on how to run things ), it can also be a liability if those employees decide to leave. This often happens when an employee is unsure about the new ownership situation and decides to move on to something else.
To mitigate this risk, try to get written agreements from key employees stating that they will stay with the existing company for at least X number of years after the sale goes through.
5. The deal might fall through for any number of reasons.
Even if everything seems to be going smoothly, there’s always a chance that something could happen that causes the deal to fall through at the last minute. This could be due to financing falling through, disagreements between buyers and sellers, or any number of other unforeseen circumstances.
While there’s no way to eliminate this risk, having contingency plans in place can help mitigate it. For example, if financing falls through, try lining up multiple sources of funding so you’re not left high and dry if one doesn’t work out.
How to Go About Finding the Right Business to Buy?
Buying a business can be a great way to get started in entrepreneurship or to expand an existing business. But how do you go about finding the right business to buy? Below, we’ll give you a few tips on how to get started.
“Decide what you want to be: self-employed or a business owner. Making that decision is the first step toward how you are going to structure your company moving forward and build your future” – Brian Will.
Consider your budget and what you can afford
Many people dream of owning their own businesses. However, not everyone has the time or resources to start a business from scratch. For many small business owners, the best option is to buy an existing business. But how do you know which business to buy?
One important consideration is your budget. You need to make sure that you can afford the purchase price, as well as the costs of running the business. If you’re not sure how much you can afford to spend, it’s a good idea to consult with a financial advisor.
Research the Industry
The first step is to research the industry. What types of businesses are doing well? What’s the average revenue for businesses in this industry? What are the key success factors for businesses in this industry? Once you have a good understanding of the industry, you can start narrowing down your list of potential businesses to buy.
“If you don’t have the right kind of data on your business, that is the first thing you need to figure out how to get – Brian Will”.
Narrow down your options and make a list of pros and cons
As many business owners know, buying an established business can be a great way to get started in entrepreneurship. Not only do you have the benefit of an already-successful operation, but you also have the support of an existing customer base and staff. However, it’s important to do your research before making a purchase.
Narrow down your options by considering factors such as the size of the business, its location, and its financial stability. Then, make a list of pros and cons for each option to help you decide which business is right for you. With careful consideration and due diligence, you can find the perfect business to buy and start building your own success story.
Look at Finances
Once you’ve identified some potential businesses, it’s time to start looking at their finances. Take a close look at the last few years of financial statements. Are they profitable? Are they growing? Do they have a lot of debt? The answers to these questions will help you further narrow down your list of potential businesses.
Meet with the seller and ask questions
Now that you’ve identified a few potential businesses that fit your criteria, it’s time to talk to the owners. Why are they selling? What are the challenges facing the business? What is their expected level of ongoing involvement after the sale?
When considering buying a small business, it is important to meet with the seller and ask questions. This will help you determine if the business is successful and if it is the right fit for you. Questions you may want to ask include: How long has the business been in operation? What are the annual sales? What is the projected growth of the business? What are the key expenses? What are the contracts in place? What is the employee turnover rate?
Asking questions like these will help you get a better understanding of each business and whether or not it’s a good fit for you.
Get a lawyer to review the contract
It’s no secret that buying a business can be a complicated and time-consuming process. There are a lot of important factors to consider, and it’s often difficult to know where to start. One of the most important things you can do is to find a reputable business broker. As a famous entrepreneur, Brian Will said in his book The Dropout Multi-Millionaire that “If you’re not good at negotiating, find someone who is”.
A good business broker will have extensive experience with the buying and selling process and will be able to provide valuable insights and advice. They will also be able to connect you with new businesses that may be a good fit for your needs.
When you’ve found a business you’re interested in, it’s important to get a lawyer to review the contract. This will help to ensure that you understand all of the legalities involved and that you aren’t agreeing to anything that could be harmful to your business in the future. Taking these steps will help to ensure that you find the right business for your needs and that the purchase process goes smoothly.
Close on the deal and take over operations!
After you’ve negotiated the terms of the sale and come to an agreement with the seller, it’s time to close on the deal and take over operations. This is usually done with the help of a lawyer or accountant.
First, you’ll need to sign a purchase agreement, which is a legally binding contract that outlines the terms of the sale. Then, you’ll need to pay the agreed-upon price for the business. This can be done with cash, through a loan, or by assuming the seller’s existing debts.
Finally, you’ll need to transfer ownership of the business. This typically involves transferring the deed to the property, transferring licenses and permits, and changing the name of the business. Once all of these steps are complete, you’ll be the new owner of the business!
Considering all of the factors involved in buying a business, it’s no wonder that many people choose to start their own businesses from scratch instead. However, with Brian Will’s guide as a resource, readers will be able to better prepare themselves for taking on the risks associated with purchasing an existing business. For more information on this topic, we recommend reading Brian Will’s book “The Dropout Millionaire”.