Starting vs. Buying a Business

posted by Brenda the Broker on 14. Feb, 2012

There are a number of ways to go into business in today’s world. You can choose to start your own business, become an independent contractor, or buy a business. We all have a unique perspective for what the best path forward is for us, but many have learned that the risk-to-reward ratio is in your favor when you buy an existing business.

Starting a Business

Starting your own brand new business can be an exciting proposition. You are going to start with a blank canvas and build your business from the ground up. As a new business owner, you will do everything from researching the products and services you plan to offer, creating a business plan, securing real estate for your business, and much more. While challenging, you will have the opportunity to go from zero to unlimited profits with your brand new business.

Along with all of the great promises of starting a new business are a number of risks. Unfortunately, the majority of start-up businesses will fail during the initial years of inception. Michael Gerber, author of The E-Myth Revisited, says that as much as 40 percent of new businesses fail in the first year and 80 percent fail within five years.

Buying a Business

Buying a business is a great way to manage your risk as an entrepreneur and still have the same opportunities to create tremendous profit for yourself.

There are a number of benefits with buying an existing business:

  • Proven Concept – As a business buyer, you already know the business concepts works so you are taking on less risk. It will also be much easier to secure financing since the bank has a historical track record of the business to analyze.
  • Established Brand – The previous owner has already invested in marketing the brand and making a name for the business in the community, which you will be the beneficiary of on day one as the new business owner.
  • Customer Relationships – Once you buy a business, you will also be buying relationships with an existing customer base and vendors, which the previous business owner invested years to build and grow.
  • Dedicated Focus – As a business buyer, you can dedicate all of your focus and time on growing the business, since all of the research, infrastructure, marketing, and other business tasks are already moving forward as the foundation.
  • Experienced People – When you buy a business, you will have an established team of employees who have experience managing the day-to-day operations of the business who will be a valuable asset for you during the transition process.
  • Cash Flow – Your business is going to have cash flow from the start with funds dedicated to paying your salary, while new start-up owners often will go for years with no salary in an effort to build the business for the future.
  • Calculated Risk – While new business owners are investing in unproven strategies, you will be in a better position to make investment decisions and calculating risk when you buy a business with a proven strategy and historical data to analyze.

About Brenda the Broker

Brenda Bernhard Los Angeles Business BrokerBrenda Bernhard, CBB, Brenda the Broker, is a Certified Los Angeles Business Broker with years of experience in business buying, business selling, and business consulting services. Brenda the Broker is based in Los Angeles and helps clients with businesses for sale locally, nationally, and globally. If you're looking to buy or sell a business, contact Brenda today!  |  Learn More

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