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Buying a business vs. creating a start-up

30 August 2019 | 0 comments | Posted by John Merashi in Industry Experts

Benefits of buying a business over creating a startup

Owning a business is one of the most adored investments of all time. It is a career-changer that has the potential to bring in a lot of income if done right.

The idea of being in control of your profit margins over a particular period is always motivating. However, a lot of sobriety in decision making goes into selecting the kind of business you seek to run.

If you are an artist like say you know or are trained to repair old phones, the investments wouldn't be huge. Whereas, if you wanted to start with retailing, it could need higher investment.

Whether or not to buy a business or create one from scratch, both are viable options and are different. Check out the following benefits of buying a business vs creating your startup:

Fewer risks involved

As much as running any business is a risk on its own, it is a different ball game to build one from scratch. Once you purchase a ready-made business, you learn all about the concept of the company beforehand.

Since a lot of the initial processes have been defined, and you have a proven idea to work with, the risks are lower than if you created a brand new business.

It is also considerably more comfortable to get funds to finance a purchase than it is to secure funding for a startup.

You are buying a brand name

Purchasing a brand means you forgo the entire process of figuring out a name, along with any marketing efforts that go hand in hand with branding.

Ideally, with a purchased company, all the branding and marketing that the previous owner had done on the business will be passed along to you.

For a startup, you have to go through the different stages of branding to get your company rolling.

An established network or database of clients

In business operations, networking holds such a primary place in the success of the venture.

The relationships you have regarding customers, investors and partners will go a long way for your company. With an acquired business, you are buying an existing customer base and vendor base.

This will help take away the trouble of figuring out how to procure new items, which suppliers to work with, and where to get your customers – all of which you have to figure out with a startup.

Less idle time

All business owners would want to get into business and start making a profit immediately.

This is not possible with a startup, as it is with a purchased business. With a lot of the fundamental issues taken care of by the previous owner, you have less idle time with your newly acquired company.

This leaves you room and resources to focus on getting the profit margins higher and strengthening your brand.

Asset transfer

A startup has no transfer of any assets or resources, unless with a stroke of luck. Buying a business is your ticket to acquiring very fundamental assets that are significant for your business, the major one being people.

The human resource is essential in any industry. Which makes them the most valued asset in the business world. Lucky for you, the people come well-trained and assimilated to the culture of the organisation.

This gives you an easier time to strategize and implement some changes within the new framework you intend to establish.

Cash flow

Statistics show that startups are not expected to make any profit in the first three years. This kind of uncertainty puts a lot of entrepreneurs on a tight spot, which explains why most businesses fail. Lucky for you, buying a business comes with a certainty of cash flow.

Depending on the amount of time the company has existed for, you can bank on the fact that there has been a revenue generation strategy.

With a bar set for you, paying salaries, covering debts, breaking even, and financing other operations like you car loans and other borrowings while retaining a decent profit margin should be possible.

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Recommended reading

If you enjoyed this post and have time to spare why not check out these related posts and dive deeper down the rabbit hole that is running a startup.

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