Countless people start businesses each year when buying may have been wiser. Conversely, there are quite a few buyers who should consider starting from scratch instead.
The decision to buy or start can be difficult and it shouldn’t be made until you have at least tested the market to determine availability and the price of existing businesses.
Some businesses clearly should be started from scratch but these usually feature unique products or services. Therefore, the choice exists only if you are planning the more common type readily available businesses. Therefore, the choice exists only if you are planning the more common type readily available businesses.
Then again, your own entrepreneurial instincts may also be a deciding factor. Many people will only consider a start-up excited by the challenge of building a business from the ground up. An equal number apparently prefer to be handed the keys.
Assuming you have no strong preference you may want to consider these factors:
1). The acquired business has a track record. You know its sales and profits so you know what the business can do for you. A start-up offers only speculation as to financial performance. Therefore, the acquired business is ordinarily a safer investment.
2). The take over of a profitable business is easier achieved. You have customers, employees, suppliers and physical plant in place. It takes considerable effort to put a start-up together and get it off the ground.
3). You should obtain better financing for an acquisition. The existing business has the track record to show lenders, available collateral and the possibilities of built-in financing through the seller, etc.
4). A start-up may be less expensive as you won’t have to pay a seller “goodwill”. Against this, however, a start-up may lose considerable money until it reaches its break-even point and may prove even more costly than an acquisition.
5). The one major advantage of a start-up is that you’ll be able to create precisely the business you want by controlling the size, layout, merchandising, image and location. whether the business you start from scratch proves more successful than an existing business would remain the important question.