Don’t start it, buy it!
Why should you buy a business, rather than start your own? Here are ten fixed reasons:
1) The success rate for purchased businesses is much higher than the success rate for a new business. Just ask your accountant.
2) An established customer base means immediate cash flow! Enough said.
3) It is much easier to find capital to buy an existing business than to start a new business. Why? See reason 2 above. Bankers are not stupid. They know the statistics. Bankers are much more willing to lend money if there is an identified source of repayment.
4) Many sellers are willing to pay back financing on very fair terms. Why? For income tax reasons. They would prefer to postpone any profit over a longer period of time, rather than taking a profit simultaneously. And if a seller is willing to pay a portion of the purchase price, it says that the seller believes the business will succeed under your management.
5) Predictions for a startup are nothing more than an educated guess. Projections for existing businesses for sale are based on historical results. Which is more reliable?
6) I am always starting, I always repeat more to start than expected. For the money you eventually spend on starting that new business (which may or may not succeed), you could probably buy an existing business with immediate cash flow.
7) You may need to raise less cash for your down payment plus working capital when buying an existing business than you would need if you were starting your own business. Why? With the financing of the owner insurance and the performance of your achievements, your existing business purchase is very bankable. A fresh start is not very bankable. The cash needed to make the new business positive is unknown. And it eats cash.
8) An established website presence. Although every business will differ, most businesses rely to some degree on an operating website. The longer a site is set up, and the more traffic the site receives, the more value search engines find on that site. This is important, as your website rankings determine your ranking in the search engine results. In other words, it is not enough to build a new website. Customers still need to find it. An advanced website can be a real asset, something that a fresh start will not have.
9) Many businesses offered for sale are actually very fair. One can often find a business for sale that will sell three to four times cash flow. Think about it. The cash flow equals four times a 25% annual cash return on investment. 25% usually covers all debt services and still leaves a decent return for the investor.
10) Reduces brain damage. Just ask anyone who’s been through the spin by starting their own business. Always wonder if customers would really come.
Think about it. It’s really a pretty easy decision.