Should I buy an existing business or start my own?

Posted on 5 January 2016

Having worked as a business broker over many years, I strongly believe that when people buy a business, they are “buying” a career or profession. Owning your own business provides job security and allows you to take control of your own future.

Although upfront you may be required to make a substantial investment, in the long term owning your own business can be financially rewarding. The time you put in, to growing your own business will be time well spent. Historically, buying a business has been shown to be a better financial investment than both the stock market and housing markets. The important thing to ensure is that you buy the right business for you, something you believe in and have the ability to grow. In the event that you choose to sell your business down the track, you should be rewarded for your hard work with a profit.

In addition, there are further benefits to purchasing an existing business. These include:

  • Instant cash flow: If you’ve done your research properly, you’ll be buying a business with existing clientele and this can be extremely beneficial. The revenue generated should cover the cost of your loan and allow you to take a salary. This is very different when you open your own business as you have no immediate income, clients or cash flow.
  • Brand recognition: When you purchase an established business, you are also buying the existing brand, advertising, contracts and employees. The business is already established within its sector and known in the community for its products or services. This is not something that a start-up operation benefits from.
  • Bank financing: When you go to the bank for a loan, it will be an easier sell if you are purchasing an existing business as compared to borrowing money for a start-up. The bank has the benefit of access to solid financial data. It will be advantageous if you also have industry experience to go with the business acquisition because the bank will be comfortable in the fact that you have the business acumen to successfully operate it.
  • Employees: The existing employees of a business are your most valuable asset. Having the right team in place will allow you to focus on growing the customer base or developing new products and services. The recruitment process can be draining, both time-wise and financially so having the right staff in place from the get-go will give you a head start for future growth. Plus, you won’t be burdened by the fact that success rests solely on your shoulders. You won’t have to worry about taking time off if you need to, such as for holidays.
  • Infrastructure: Most businesses will have systems, operating manuals, complex IT platforms and other infrastructure that support the company’s operations. These are the foundation for future expansion.
  • Training and transition: Don’t under estimate the value the seller can offer you as you transition into the business. They’ve worked in the environment you are about to enter and so can offer guidance on a range of issues including training, key clients, suppliers, employment contracts for future services, and other critical areas. Soak up as much information as you can.

Small business ownership can offer many benefits. If you are seeking long-term security and a financially rewarding lifestyle, being your own boss may be the right move for you. Talk to the ABBA Group and learn how we can help you make this move.