Many people think they have two choices either work for someone else or start their own company. However, a third option – buying a small business – is often overlooked. Each year thousands of businesses are for sale. If you have a desire to be an entrepreneur, buying a small business can be less risky and allows you to skip the difficult start-up process. While buying a small business requires a larger upfront investment, there are several advantages.
Immediate Leadership Role
Do you want to be your own boss? In the corporate world, you work 10-15 years and climb the rank in someone else’s company till you earn a leadership role. On the other hand, as a business owner, you assume the leadership role very early on in your career. Not only do you manage people, but you get hands-on experience in various business roles. This may include hiring, training, selling, negotiating, finances, etc. There is a lot of learning and growth when you run your own business.
When you buy a small business, you take a calculated risk. This means many of the pitfalls and potential failures that come with a start-up are eliminated. Instead, you start with a proven concept and work with an existing business model. As a buyer, you know the process or concept works. Buying a well-managed and profitable business at the right price can be less risky than starting your own business.
Build Your Life
One of the most attractive components of buying and owning your own business is the ability to build the life you want to live. For some individuals, this may mean being home with their families. For others, it means creating the environment they want to work in. By buying your own small business, you can shape it in a way that enables individuals to thrive. This is the catalyst behind Peak’s vision of ‘Building Businesses that Thrive.’
Immediate Cash Flow
Buying the right small business can provide immediate cash flow. Not to mention, later on it can potentially be resold for a great return. With a properly structured sale, you can cover any costs of financing, receive a reasonable salary, and have a cushion for growth. Start-up companies often don’t make money for the first few years. As such, buying a small business yields immediate cash flow that is very beneficial to business owners.
Financing the purchase of an existing business is often easier than securing funding for a start-up. Reason being a lender can see the historical financial performance that gives them an idea of what to expect in the future.
One of the most valuable and important assets in a business acquisition is the people. A quality team can help you hit the ground running and implementing strategies to grow the business. Finding, hiring and training the right individuals takes time. Individuals who already know their jobs can share their experience and help keep the business flowing smoothing. In addition, having the right people in place will give you more freedom to spend time with family, vacation, or pursue other ventures.
When you buy an established business you not only buy the name, but also the customer base and suppliers. These relationships may have taken years to build and saves you from having to place cold calls and attract new business with an unproven start-up. In addition to the relationships, there are a number of intangible assets that are very valuable and difficult to create with a start-up.
Buying a small business is one of the best investments you can make if done wisely. There are certainly pros and cons, but through careful analysis buying a business can pay great dividends.
Peak Business Valuation would love to help you with buying a business. We have contacts with several brokers across the country and provide business valuations to help in the purchase negotiation. Questions are always welcome. Please reach out via email or phone call.