Part of succeeding as a brand involves knowing which existing companies can help you achieve your goals. Here are reasons why you should buy a business.
More younger people seem to be considering to buy a business today than build one themselves. Around 23% of business buyers are 39 years old and below. This demographic accounts for only 14% of current business owners.
One reason might be because it’s easier to buy an established business. Doing this, they can bypass the hardships of building one from the ground up.
This is only one reason; check out the other reasons why you should buy a business below.
1. There is Immediate Cash Flow
What many don’t realize when starting a business is that they’ll be spending a lot of money at the start. At the first stages, they’ll have to shell out more money than they earn for building the business, unexpected expenses, paying for people, and many more. They won’t likely see a cent back for months (or even years).
When you buy a business, you’re earning money the moment you sign that contract. An existing business has already passed all (or most of) these hurdles. They already have a cash flow.
Even if the business isn’t generating high profits and you still have to fix some things, a running business will still give you income.
2. The Business Has Existing Customers
Likewise, you already have a customer base. Some of these are already loyal to the business, so you won’t go through the hardship of earning your first ones.
There are already people who trust and support your business, which leaves less work for you as they can bring you more business through word of mouth.
They already have a market, so you don’t need to target an audience and all the works. Around 42% of small businesses fail because of the lack of market demand, so you’re facing one fewer risk.
That doesn’t mean you shouldn’t put the effort in, though. You should still learn how you can keep them happy and how you can get even more customers.
Maintain the status quo for a while to keep them. Then, give them enough notice before introducing any changes.
3. The Foundation is Already Set
Speaking of, the operations of a business are the hardest things to build. It’s tough to figure out the right tricks to keep the business afloat. You need the right ingredients, from the policies to the operating procedures.
When you buy a business, all these are in place. A successful business has a functioning ecosystem that’s turning the right gears.
Building this from scratch can take years of data gathering and experimentation. But, you don’t have to go through that.
You only need to replace the driver as the car is already running. If there are some things you don’t like, such as the driver’s seat or the air-conditioning, then you’ll only have to focus on fixing those things.
4. You Get a Working Structure
Aside from the foundation, the business already comes with the infrastructure, too. This time, we’re talking in a literal sense.
You need at least a room when building a business. You need to find the right location for your office, warehouse, or physical store. Then, you have to furnish it with fixtures, furniture, and the right equipment.
You don’t have to worry about these things when you buy a business. Everything is in order; there’s an existing contract for the location, and there’s no moving to take care of.
5. You Spend Less Time on Training People
Acquiring a business also means you get the people working there, even if they’re outsourcing a few operations. As such, you already have people who know the operations of the company.
They’re already familiar with the systems, the accounting, and the inner workings. You don’t need to train them, and they can train the new people coming in.
The existing employees are the ones to ask when you need to know something. They’re going to be a huge help to you during the transition.
Should you need to change some things around to improve the chances of a failing business, they’re also the first ones you should refer to. These people will know first-hand the issues within the company.
6. You Don’t Have to Use Your Own Money
With all the benefits of buying a business, it must be crazy expensive to do this. While it’s true, you don’t have to use your own money (or most of it) to acquire a business.
One way you can do this is to make a deal with the seller. For example, both sides can agree that the seller will still get a cut of the monthly profits. This would continue until they reach a certain amount.
Another strategy you can do is to do a leveraged buyout. In this method, you leverage the assets to finance the transaction.
It’s also possible to put no money down on one condition. The seller should be willing to sell the business at a price lower than the value of its assets. It’s a tough condition to meet, so the opportunities are scarce. Why would anyone want to sell their business lower than its actual value, anyway?
7. People Want to Sell Their Businesses
For some, a business is the result of their passion and hard work. That’s why selling a business isn’t on the table for these people.
However, many other people want to sell theirs in actual and for many reasons, too. The owners may be looking to retire, the company might not be making profits as they had hoped, there’s no one to inherit the family business, or they’re moving to another country. Sometimes, the stress of handling a business becomes too much for them to bear.
Whatever the reason is, the point is that you have lots of opportunities if you know where to look. The business doesn’t have to be failing to be on the market. It can be a hugely successful business with the owner looking for a new venture.
The only important thing is to communicate with the seller. They must be willing to sell to YOU and you must be well aware of the state of the business before signing any contract.
8. It’s Easier to Get Financing to Buy a Business
Another way to get the money to buy a business is to get financing. It will be easier for you because you have the business as the collateral.
It’s not as easy for start-ups because they have more to prove and nothing to show yet. Vendors want to make sure they’re getting repaid, so lending money to a non-existing business is a risky move.
They’re going to want to talk with you, though. You can show the business’ balance sheets, cash flow statements, income statements, and tax returns. They can use these to gauge the risk of lending to you.
You can also leverage the business’ collateral, such as equipment or real estate. If the business looks good on paper, lenders will be happy to work with you because you pose fewer risks.
9. You Face Fewer Risks
Around 80% of small businesses fail during the first year. About half of the remaining ones don’t make it past year five, and only a small number of businesses stay afloat. When you’re buying an established business, there’s less risk because it has already gone through the dangerous years.
To further decrease the risks, you should keep the business running as it was if it were successful. Why change something that works?
Everything is already stable, so you have to be careful with disturbing that stability. Sudden changes can undo previous growth.
It’s a whole other matter if the business is failing, though. But, as we said above, you already have customers, cash flow, and pretty much everything else. You now only have to identify the systems that don’t work and improve them.
10. It Might Be Easier to You to Fix a Business
If you have the right skill set, you can apply those skills to the business to lift it. It’s different than using those skills to build it from the ground up. For some, it’s much easier to fix a company for various reasons.
One: you can learn from the seller’s mistakes. You can avoid them and think of something better, which also minimizes the risks.
Two: you can keep the good and improve the bad. Some systems may already be working well, but some processes aren’t. You don’t have to do a complete overhaul; you only need to transform the bad ones.
Knowing how to do this, though, takes some serious skill. It’s not for anyone, but for everyone who can do it, buying a business and turning it around can be an easier and quicker method of earning money.
Find the Right Business to Buy
Your skills should be a huge factor when deciding to buy a business. They must align with the type of business you want to buy to further increase your chances of succeeding.
We might make it seem easy, but it still takes a lot of hard work to adopt a business. Contact us today to learn more about entrepreneurship.