Start a New Business or Buy an Established Business

Daniel Younkins | Broker
Sunbelt Business Brokers

Starting your own business can be very rewarding but needs to have a unique product, technology, or service. Let’s face it, there are very few “new ideas” out there that have not already been tried. One would need to complete a thorough evaluation of the marketplace, competition, need—in other words a Business Plan. If you start your own business, you will not be paying for Goodwill or Bluesky. Perhaps you can start from your home with no employees and greatly reduce the initial capital requirement.

However, you will need to support yourself (and family) from personal savings. There may be months or years before profits are sufficient to provide the level of income needed. Obtaining financing may be very difficult as there is no track record and no customers. The chances of survival of a start-up business is low—a 75% failure rate according to the Bureau of Labor Statistics.

Buying an existing business may be a more efficient way to business ownership, but it is frequently more costly. Existing business owners will expect a premium for providing you with an existing customer base and location. The advantages of buying an existing business generally outweigh the disadvantages. Existing businesses can normally obtain financing from financial institutions because they have established history, assets, and a proven idea. The seller will quite often provide a portion of the financing in the form of a loan.

Established businesses are less risky because they have an existing customer base, relationships with suppliers, an operating process, a known location, and employees that are hired and trained. In addition, there is an existing cash flow which can provide immediate income to the buyer. Experts generally agree, in most cases, that paying the extra cost for an existing business will outweigh the risks of starting one from scratch.

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