Maybe you were planning to start a business from scratch this year but there might be an even better way. Have you considered buying somebody else’s business? Not all businesses are sold because they’re failing. Sometimes life events like divorce, retirement, or illness cause business owners to sell at bargain prices. Buying a business that already has a customer base rather than starting from scratch has some unique advantages.
If you start a business from nothing, it will take a considerable amount of time before you start seeing any profits pour in. You have to invest money in to advertising, equipment, personnel, and property so not only will you not see a lot of profit, you will have a lot of money tied up in the business while it’s growing. Buying an existing business allows you to buy in to an already present customer base where the acquisition of your first customers will already be done for you.
As part of the deal to acquire the business, you may ask for so many months of consulting time from the existing owner. Most small business who have grown a business from nothing don’t want to see their hard work result in the future failure of the business so they’re often happy to help you in the beginning stages. You probably won’t take all of their advice but they’ll be able to provide business and community specific information that is valuable to you.
Successful businesses don’t happen by accident. They are a result of long-nurtured relationships with banks, vendors, landlords, and local officials. As a new business owner, you would have to build these relationships from scratch. With an existing business, you will have contacts in place although you’ll still have to work hard to show these people that you’re just as trustworthy as the old owner.
Before purchasing a business, get professional help from an accountant, an attorney, and a consultant in the industry. Any time you purchase something from somebody else you’re buying their problems and before committing money to this business you want to have a complete understanding of those problems.
The accountant should do an exhaustive review of the books, the attorney should review the deal you and the current owner agree upon, and the consultant should tell you if the business has a reasonable chance of future success based on its location, traffic, and product offerings.
Starting a business from scratch may be the best path for your industry but for many businesses, buying an existing business may be the better investment over the long term.