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‘Start-up’, as captivating as it sounds, the idea is quite appealing, but, you should keep in mind that envision is far away from the reality. You must be completely aware of all the favorable and unfavorable factors associated with starting your own business. Research has shown that 40% of new businesses fail in the first year, 50% within the two years and 80% fail within five years. On the other hand, buying an existing business reduces risk while creating opportunities for tremendous profit. There are a number of reasons to consider the purchase of an existing business rather than starting one. Here are some of the reasons.
Income from day one
Though your start-up idea may prove to be promising once it begins its operations, it would still need extensive support to pass through the initial and the most challenging phase – setting up everything from the infrastructure to equipment, assets, fixtures and fittings, legal and professional fees, licenses and plenty of other preliminary expenses.
On the other hand, buying an existing business would mean income from the first day. Buying a business that is able to pay its own bills and has an identity of its own in the market, allows you to focus on its expansion and long-term growth strategy.
With an existing business you are buying into a recognisable brand with a track record, complete with all the trademarks, copyright and websites associated with it. This gives customers, suppliers, lenders and other contacts a confidence in your business that they may not have when interacting with an unknown startup.
Easy to get finance
The first and foremost prerequisite of establishing any venture is finance. No matter how innovative or extraordinary your startup idea is, it cannot be brought into existence without proper funding, depending on the nature and size of your business idea. Any lender or investor would be more inclined to invest money in an already established business, which holds a good reputation in the market, rather than investing in a start-up idea with a lot of associated risks and uncertainty.
Instant access to customers and other important contacts
Buying an existing business would not only save you a lot of time and efforts, it would also provide you an already loyal customer base. Having customers, who already trust your venture is definitely a win-win situation for you.
Not just customers, you would also have an established network of other important contacts like that of vendors, suppliers, and marketers. The business you purchase would come with established relationships with trademark and copyright where applicable, banks, insurance companies, advertisers, professional advisors, moneylenders, etc.
Opportunity for business expansion
The same time and energy that you would have spent in starting up your business, can be utilized to look for opportunities for the expansion of the business you buy. You will get time to focus on the parts of the business that demand attention. Rather than waiting for your startup to generate sufficient income, you can give a kick-start to the existing business you buy with its steady income.
Skilled and trained employees
As per the old saying, “Employees are a company’s greatest asset – they’re one of the main factors that determine your competitive advantage.” And finding those greatest assets is one of the most grinding and time-consuming tasks.
By buying an existing business, you get an added advantage of having trained and skilled professionals in the team, who know their work and ready to keep the ball rolling. You can save all the time and efforts that is needed in finding skilled professionals and making them understand the company culture and nature of work. An existing workforce means that you can delegate work right from the first day, and get the business going.
Risk is an inseparable part of doing business. It cannot be eliminated rather it can only be anticipated and so as to take proactive measures dealing with it. No matter how much research, time and money you invest in your business plan, starting a business from scratch is a huge risk.
But, this risk for failure may be reduced significantly by buying an existing business, which is doing reasonably well. Chances are that you would be able to further expand the business, adding more product lines or services.
Overall, buying an existing business is far more advantageous than starting a fresh one. You not only gain access to a business that can pay its own bills, but also find it easier to seek financing, get ready-to-move-in infrastructure and set up, an existing customer base, trained workforce, access to a new market and reduced risk.
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Author: Michael Oke
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