Search
  • Jody Baxmeyer

Considering Buying an Existing Business? Here Are Some Pros and Cons



As an entrepreneur, you have many options for how to make your presence known in the business world. While most business-minded individuals choose to create their own product and make their own company, there is another option, and that is to take over an existing business and do the best you can to help it thrive. There are pros and cons to both. You just need to figure out what is best. Here’s some advice for whether to start your own business or buy another.


Consider the Costs


The decision to start a new business or buy an existing entity often starts with money. In most cases, buying an existing business can be a bit more costly because the seller can name their price and if it is a more profitable venture then it will often cost more to purchase. However, on the other side of that, it can be easier to obtain financing to buy an existing business because there is proof that the enterprise can be successful and will continue to bring in a profit.


If you start a business from scratch, the costs can often be smaller because it may be just you, a computer, and a few other supplies. However, as time goes on, the business will cost a bit more. According to many studies, once you get up and going, a new business can cost around $30,000, while an existing company can cost double, or more.


While you may be excited to buy a proven business, you will want to do your research before you commit to the purchase. The best idea is to crunch the numbers with a business valuation where you can factor in the marketing approach, assets, and potential future earnings to determine how much a company may truly be worth. Then, you can hire an appraiser and hopefully move forward with the deal.


Proven Product


Another great benefit of purchasing an existing business is that you know that you have a product that sells. Often, when you start a new venture, you may believe in your own product but then you have to do the legwork to complete focus groups, get customer opinions and reviews, and then test your product and make tweaks over the years until you have the perfect service that sells.


With an existing company, that market research has already been completed, so you start off hot right out of the gate with profits that you can use to continue to grow the business. It is a wise idea to continue to get customer feedback, but you won’t have to start from scratch.


An existing company will also have a solidified fan base, and if that company sells a good product, then you know that people already like what you sell and approve of your business model. When you start a new business, you can still get the adoration of your customers, but it will take much longer.


Potential Updates


It may seem that buying an existing company is a home run, but there are certain realities that you will have to consider. For one, that existing company may have been around a while and so it may have older technology and software that may have to be updated as soon as you buy it. Software can be costly, so you could already find yourself in a hole. Fortunately, there are low-cost and free tools that can help. For example, if you want to revamp your business’s logo, you can utilize an online company logo design tool and add your own color, font, and text to existing templates.


Another consideration is that an existing company may have had its heyday but profits aren’t as good as they used to be, and in that case, you may have to make significant changes to the business model to ensure its success. If you start a business from scratch, you know that you are starting it your way, which may be the best way.


In the end, there is no right or wrong answer when it comes to whether to start a new business or buy an existing property. It simply depends on your situation and cash flow. Whether you’re buying a business or starting a new one, create a plan for success by working with the expert marketing and branding professionals at JaM Advertising & Productions!

3 views0 comments