Thinking of starting your own business? Buying an established business could be the smarter move. Read on to find out why.
To open your own business, you need to be willing to go through a lot of trial and error. After all, the price of success is a whole lot of failure. That’s just the way these things work. But of course, you should do everything you can to you can increase your chances for success. One way of doing that is buying an established business instead of starting your own idea or brand from scratch.
Go on, take a look at established businesses in your industry that are for sale.
When I first jumped back into hospitality after 5 years of being in the commodity trading business, I was eager to start on my own bar and restaurant from scratch. My father, also a businessman, looked through my plans, then turned to me and said, “Before you invest all this money, buy a failing restaurant or bar that is in need of liquidation.”
Hesitantly, I did as he said. Swallowing my pride and listening to my dad was the best decision I made that year. Today, I still own that very business and have no plans to sell soon. Like a phoenix, the place has risen from the ashes thanks to the hard work of my team.
Why buying an established business can be better than starting from scratch:
1. Minimisation of risk factor
Running your own business always comes with the risk that your return on investment (ROI) will be much lower than anticipated, leading to a default risk that would cause you to shut down your business.
By buying an established business, you minimise risk due to the fact that your initial investment would already include a brick and mortar office, a database of consumers, brand, inventory, etc.
If you were to attempt to build your company up from scratch, your initial investment would be far higher, making it a much riskier venture.
2. Time is of the essence
Creating your own establishment from scratch will take a lot of time. If you are uncertain if this industry for you, I would strongly advise you not to waste your time building something from the ground up.
By buying an established business, your company would no longer need creation, just progression and continuity. This allows you to go straight into the essence of the business without wasting precious time.
3. Tools of trade
Another major perk of buying an established business is by doing so, you buy their tools of trade. Every business needs to have a selling point, and if you’re starting your own business from scratch, you have to establish that yourself. It may take days, months, or even years.
When you buy an established entity, you get their selling point, their code of conduct, their standards of procedure, and their client database. Everything is handed over to you, and your motivation to run it better is all you’ll need to propel the business into greater lengths.
4. Knowledge is power
When you buy an established business, you’re paying for knowledge. What you will learn from an established business will help you when you open up your next business from scratch.
As with anything there are pros and cons. Depending on your industry that you want to be in, analyse and study what is best for you. And most importantly, before you purchase any business, due diligence is key.
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