When most people think of starting a business, they think of beginning from scratch–developing your own ideas and building the company from the ground up. But starting from scratch presents some distinct disadvantages, including the difficulty of building a customer base, marketing the new business, hiring employees and establishing cash flow…all without a track record or reputation to go on.
Reasons for Buying an Existing Business
In most cases, buying an existing business is less risky than starting from scratch. When you buy a business, you take over an operation that’s already generating cash flow and profits. You have an established customer base, reputation and employees who are familiar with all aspects of the business. And you don’t have to reinvent the wheel–setting up new procedures, systems and policies–since a successful formula for running the business has already been put in place. With the right negotiations, a business can actually pay for itself. With Integra, buying a business can offer you:
- Established credit history and relationships with vendors.
- Trained employees.
- Established customer base and reputation.
- Existing licenses and permits.
- Actual operating results, rather than projected results.
- Immediate cash flow from the ongoing business activities.
- Return on investment in one year.
- Training provided by the seller.
Buying a business can be more costly than starting from scratch. However, it’s easier to get financing to buy an existing business than to start a new one. Bankers and investors generally feel more comfortable dealing with a business that already has a proven track record. In addition, buying a business may give you valuable legal rights, such as patents or copyrights, which can prove very profitable. Of course, there’s no such thing as a sure thing–and buying an existing business is no exception. If you’re not careful, you could get stuck with obsolete inventory, uncooperative employees or outdated distribution methods. To make sure you get the best deal when buying an existing business, it is strongly advised to work with a business broker.
Brokers can offer assistance in several ways.
- Prescreening businesses for you. Good brokers turn down many of the businesses they are asked to sell, whether because the seller won’t provide full financial disclosures or because the business is overpriced. Going through a broker helps you avoid these bad risks.
- Helping you pinpoint your interest. A good broker starts by finding out about your skills and interests, then helps you select the right business for you. With the help of a broker, you may discover that an industry you had never considered is the ideal one for you.
- Negotiating. The negotiating process is really when brokers earn their keep. They help both parties stay focused on the ultimate goal and smooth over any problems that may arise.
- Assisting with paperwork. Brokers know the latest laws and regulations affecting everything from licenses and permits to financing and escrow. They also know the most efficient ways to cut through red tape, which can slash months off the purchase process. Working with a broker reduces the risk that you’ll neglect some crucial form, fee or step in the process.
Getting Started
Buying a business is a major decision. It will affect you financially and change your lifestyle. How you live your life is shaped and influenced by how you earn your living. If you have decided that now is the time to consider buying a business, we can provide you with the professional assistance necessary for a smooth and successful transaction. Search our businesses for sale listings for a business to buy or contact us to find the right business for you.