buy existing business vs. start from scratch

Aspiring entrepreneurs dream of being their own boss. But it’s more than that. They dream of being successful at it. Starting a business from scratch is one way to achieve this dream, but it’s not without risk. Most startups fail within their first few years.

Buying an existing business is an excellent alternative. Most experts will tell you that it’s the safest way to go into business for yourself. As opposed to startups, the failure rates of businesses that have been around for at least five years is very low. If you want a higher chance for success as a business owner, buying an existing business is your best bet and here’s why:

Begin operations immediately — In an existing business, the foundation has already been laid, freeing you up from having to take the time and energy to do all of that tedious work that comes with starting a business from scratch. Instead, you can jump right into what you should be focusing on… growing the business.

Less risk — In terms of costs, if a start-up fails, you lose your investment and probably at least a few years without income. By buying an existing business, you’re simply building upon what’s already been established.

Instant cash flow — Rather than waiting months or years before there is enough cash flow to cover expenses with a start-up, existing inventory and receivables means instant cash flow for operations, debt service and payroll.

Skilled workforce — Along with the business, most of the time you’re also buying the people that are in place. An already skilled workforce can be fully productive from day one, alleviating the need for you to hire and train new staff.

Established customers and vendors — With an existing customer and vendor base already in place, you can work on maintaining the relationships that have already been established by the previous owner. If the owner stays on for a period of time after your acquisition, the transition will be that much easier.

Better access to financing — A business with a history and proven track record is more likely to get approved for a loan from banks because there are actual numbers to base their lending decisions on.