So, you want to start a business.
It may be enticing to start a business from the ground up. It is a route many take to achieve their goals.
But another option is to buy an existing business. Although this route may include a higher cost for initial investment, it also allows entrepreneurs to begin quickly, with an already tested market, established brand, and access to a customer base.
Unfortunately, established businesses may also have:
- A poor reputation
- Inefficient processes
- Dated technology
To avoid these pitfalls, consider consulting a business broker.
A broker will already have done the work to make sure available establishments have optimum earning potential, will provide helpful connections, and smooth transitions and processes.
Regardless of these pitfalls, however, you may find that the pros greatly outnumber the cons when it comes to purchasing an existing business for your next venture.
Of the many pros of buying an established business or franchise, these five stand out:
- Startup time is significantly reduced
- It’s easier to secure financing
- The brand is established
- The product or service is market tested
- There is an established customer base
A quick start
If you are buying a business from scratch, unexpected challenges begin early. For example, you will need to ask yourself:
- What inventory will I have to purchase?
- Who will supply them?
- Who will I hire?
- What location is best?
For each of these questions, also expect logging lots of time into research, process, and implementation.
Start up for an existing business requires far less time and effort on these tasks to set up the basics of your business.
The business already will provide established vendors, trained staff, procedures, and a tested location from the start.
Better Financing Options
Lenders look to assurance before offering financing options. Existing businesses already generate a revenue stream, which is attractive to lenders.
Their reputation and customer base provide assurance and better financing options. Further, established businesses have assets and inventory that can be used for collateral.
In comparison, starting a business from scratch will not generate revenue right away, will not have data from an established customer base to draw on, or have assets that can be used for collateral.
Existing businesses will likely secure more favorable financing in comparison to startups.
An Established Brand
Developing a brand is expensive and time-consuming endeavor, as well as an important one.
Entrepreneur Magazine claims branding is one of the most important aspects of any business, and expertise and time spent developing it is invaluable.
The time not spent waiting for the brand to grow, expand, evolve, and draw customers, can instead be spent tweaking the existing brand with a minimal investment of time and money.
The Market Has Been Tested
Knowing the product or service of your business has been market tested is a great advantage.
Getting a read on the market is crucial to knowing about the success that can be generated, the value of your service or product, and the emotional connection it has to its audience.
Already established businesses provide an already tested model that allows value to be known immediately.
Further evaluation and research on the market, as well as purchase options, will be more efficient than testing the market from scratch.
Having a built-in customer base can mean less expense from the start, both as a source of cash flow and a market-tested informational boon.
The advantage of having an established customer base is the simple fact that customers already know the brand and tend to be loyal to an established business.
Therefore, instead of time spent developing a new audience that may already be loyal to another brand, or spreading the word about your new business, it will instead be spent on expanding an already existing base with existing cash flow.
So Many Benefits
The advantages of buying an existing business far outweigh the disadvantages.
Convenience and return on investment will come more quickly, due to established customers, market testing, brand, and better financing options.
Consider these benefits before starting from scratch, as well as finding a good business broker to be the source of well-established businesses to choose from.
Making the choice to buy an existing business is a strategy that often leads to the quickest, most efficient start and continued success.