Should You Buy A Business

YoungGoGetter: Simply put, buying a business presents a completely different opportunity to owning a business than the traditional “start from scratch” strategy that a lot of us are familiar with. Before jumping in, you get the chance to see how well the business is running before you make a decision. If its something that has passed your screening process and it’s something you are considering, chances are the business is structured well already. Of course, this means that there’s less risk involved and maintaining the business shouldn’t be an insurmountable task, theoretically speaking. As well, with a stable business, most likely a steady positive cash flow will accompany it. When it comes to market share, starting a business creates more competition, whereas acquiring a business maintains the existing market share. As you can see, the benefits of buying a business are clear, but before you head to the bank or go running around frantically searching for businesses, there are a few other things to consider.
Park Place vs. Baltic Ave…
The first thing you have to understand that it’s going to cost you a lot more to buy and existing business than to start your own. Built in to the cost of a business is the sweat equity, the time and effort that the original owner put into the business to start it and get it off the ground. It was them that took the risk for you and spent countless hours developing a foundation and you can expect to be paying for every bit of it. Essentially you’re paying a premium price for someone else to create a business. They’ve already created a brand name for themselves and you’re not just buying the business, you’re buying the brand name too.
Even Matlock Can’t Get You Out of This One…
You can call him up to go over a company’s bookwork with a fine-tooth comb before purchasing it, however there are some things that the books just can’t tell you. A bad corporate reputation or poor customer perception can be something that comes along with the business you bought, and that’s very tough to foresee. You are taking over the business as it is. You can’t expect to know everything about the business without being at the helm of it for some time. Old equipment, operating systems or buildings can end up costing you a lot of money to update, but outdated systems can be a great negotiating tool to leverage down the asking price if they can be uncovered before you make the purchase.
It’s a Little Better Than Working for Your Dad…
Your freedom is limited in the sense that there are current systems in place. For example, specific lease agreements may prevent you from altering any physical specifications of the building. As well, more ofthen than not, you’ll have to live with the location of the business as you bought it. Current customer processes are difficult to change too, especially if there is a lot of rapport with the existing client base and they are used to things being done a particular way. Even worse, if clients took advantage of the previous owner (not necessarily losing money, just not maximizing), it can be tough to retain them as you retrain them. On the other side of the table, you have your employees. You have to be careful not to decrease morale by making the first order of business a change in employee policy. By changing things to your requirements too fast, you can upset the delicate balance of a smoothly running machine.
Would You Miss Your Kid’s First Steps?
This may be more of an ego thing, and granted, this isn’t exactly the same thing as your child’s first steps here, but when you start a business from the ground up, there’s the sense of pride you just can’t get when you buy someone else’s business. The proverbial first steps of a business can contribute to the pride which translates into an attitude, a personality that can be manifested in the way the business is run. Many business owners treat their business like a child, even more so when they created it.
Now is the time that you stop and ask yourself, “Is it right for me?” Like I said, buying a business presents a unique opportunity with limited risk, but there are some snags to watch out for. You may pay a premium for a business you want, but with it comes the hidden items that you don’t. It’s pretty obvious that owning a business is a big deal and shouldn’t be taken lightly. This is definitely something where you need to get your ducks lined up. But, as long as you look at it from every angle a few times over, the decision shouldn’t be that hard. So…….is it right for you?
Shedding Some Light on Buying a Business [YoungGoGetter]