Business Start Up VS Buying a Business

Business

Buying a business is another way to enter business ownership. There are many similarities between a start up and entering business ownership through acquisition. Like everything in life it has positive and negative sides. Availability of time, money and skills should determine the business you will buy.

Look for a business that you can manage
The type of business you consider should reflect what you already know. Owners who spend years building their business from the ground up are protective of their creation and like to know the qualifications of potential buyers. Usually they avoid dealing with people who do not have the money and skills to operate a business. As a buyer you should avoid having the supermarket shopper syndrome when looking for a business. You have to know what you are looking for. For example a restaurant, clothing retail store and manufacturing company require different set of skills and expertise to own and operate.

Decide how much to spend on a business
In the beginning of the business acquisition process any prudent buyer will ask the following two questions. How much money I have to buy a business? Do I have enough operating capital to run the business? There should be a clear understanding how much money is available for acquisition. In many occasions some financing maybe available from the business owner, banks or other sources. Yet, this is valid for bigger businesses with established history and proven profitability. There is not much available for smaller and losing money propositions. Sources of money have to be clearly identified ahead of time. Acquiring a business is significantly more capital intensive in a short term than a startup.

Decide on general business location
Decide on desirable physical area, neighborhood and location before starting to look for a business. Small business owners spend considerable amount of time in their business. You have to like the location. It is important to know how far you are willing to commute. Are you going to move to another part of town, city or state for a good business?

Have an acquisition time limit
Buying a business should not be open-ended process. Appropriate time frame should be within two years or sooner. Owners want to work with serious buyers. Having a time period within which you will purchase a business tells the seller that you are serious about buying a business.

Have a vision for the acquired business
Another very important aspect is to have a vision for the business you are buying. Every business is unique and reflects owner’s dream and value system. By buying a business you are purchasing other person’s dream. You have to have your own vision about the business as a new owner. Any, changes must be introduced with great care.

Benefits of buying a business
The major benefits of a buying an established business are reducing risk and immediate access to income. Also, you acquire with it a working operation, access to customers, suppliers and trained employees. In addition you buy into owners expertise. Usually, the seller will train for a limited period of time. However, she will not teach basic business skills. The buyer has to have the skills and knowledge to run a business prior to purchasing one. When a business comes on the market the seller in most cases will separate mentally from it. They do not want to go back and revisit it after the sale is completed.

Challenges to buying a business
Acquiring a business requires significant amount of cash to buy and operate the business. Need to learn the business quickly to get in sink with the established operation. Some employees, customers and vendors may not like you and decide to look for other opportunity. Historically this translates to a six-month drop in sales for the new owner.

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