Should You Buy an Existing Business or Start Your Own?

Should you buy a business or start your own? This is the question pondered by many people who think about giving up their job and becoming their own boss. There are pros and cons that go along with either decision.

by Vicki Gerson
NFIB.com

The advantages of starting a new business

If you start a new business you will have complete freedom of choice concerning all aspects of the business. These choices include selecting a location that appeals to you; determining which products or services you want to offer; hiring the staff that you select; finding your own accountant, lawyer and banker; and determining what suppliers you want to use.

Even if you have limited capital, you can start a business on a small scale, even out of your home. Many computer consultants, writers, public relations specialists and decorators have home businesses. Another option is to sublet space in an existing office or use a business center where you will get an office and a receptionist who will take your calls.

The disadvantages of starting a new business

It takes time, effort and hard work to start a new business. You must develop a business plan, get financing, find suppliers and purchase the equipment you need. You should have at least six months to a year of income put aside before engaging in this full-time venture.

It also takes time to find customers, develop lines of credit, get the necessary insurance and find good help.

Advantages to purchasing an existing business

When you purchase an existing business, you already have customers. They provide instant income, which means you have cash flow. The business will already have suppliers, accountants and other contacts. While you may not decide to continue all of the relationships, working with people already familiar with the business may be an advantage.

You also won’t need to worry about choosing the right location. Some landlords will allow the new business owner to sublet or will quickly draw up a new lease for you.

Disadvantages to purchasing an existing business

If you plan to create a new image for the company, this will take a while for long-time customers to accept. It is also possible that you will lose customers because you are a new owner. Clients may have liked the old owners, and have no loyalty to you.

If you inherit employees, it will also take time to change any policies or rules. Employees may cling to the old way and balk at adopting your ideas.

It is important to keep in mind that the business owners will establish a value for their business, which may be more than you want to pay. It may be difficult and will take time to work through these differences. You may need to hire an expert who can truly determine the value of the business.

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