Buying Vs. Business Start-up

[dwilliams]

Should you start up a new business or should you buy an existing one? If you decide to buy one, should it be an existing business or maybe a Franchise? There are a lot of factors to consider and the final decision should be based on your own preferences.

Starting up a business
With a business start-up you can set up every thing just the way you want it. You don’t have to worry about assuming someone else’s bad reputation or ill will. When you start from scratch, you don’t need to worry about fixing things including employee attitudes or customer dissatisfaction.

On the other hand starting up a new business is definitely a lot more work for you. You have to set-up all the business systems, products, services, decide on pricing, find vendors and more importantly… find customers. With no track record, trade references are harder to get and you will have to spend more money marketing to get your name out there. It generally takes two years of success to get bank financing.

Buying an existing business
By buying an existing business there is a history of sales and profitability. You can inspect the financials to see the health of the business. Systems are already in place so you can be up and running without any delay. By buying an existing business, presumably it will come with a ready stable of customers that will mean almost instant cash flow.

When buying an existing business, make sure it has an ideal location with a good steady flow of traffic and potential customers. Check out the fixtures and equipment and make sure that they are up to date. Ask around to see what kind of reputation this company has developed. The intangibles such as a good reputation and a good book of customers are extremely valuable.

Frequently you will get a trained staff and employees along with working business systems. The selling owner may be around for advice when needed. The supplier relationships are usually already established along with trade credit. Inventory is usually in place.

Bank loans will be easier to get if there is a profitable business history even though you are a new owner. By buying the business, you prevent someone else from purchasing this business and thus becoming a competitor.

Buying a Franchise
Buying a franchise is in between a start-up and buying an existing business. With a franchise, you are purchasing the use of their trademark and brand name. You are able to take advantage of the marketing by the Franchisor. A franchise comes with a ready operations manual, quality standards and training.

You still need to outfit a building and hire employees. You usually have to abide by the franchise rules and don’t have the freedom to be creative or innovative in how you deliver the product or service.

You can choose to start from scratch or buy an existing business. Which you choose will depend on your strengths, capabilities and experience. In any case… it’s nice to have a choice.

[fred333]

I think it depends on the time element.