Should I Start A Business Or Buy One?
Have you been dreaming of starting your own business, but aren’t sure where to start? Most people think starting a business means coming up with a new and unique concept, then building it from the ground up.
Truth is, that’s not the only way to get started. You can buy a business that already has traction and has been through many of the early growing pains that come with starting a business from scratch.
Empire Flippers works with business owners every day – ones who’ve built a business from scratch and are looking to sell, some who want to expand their current business by adding a new website to their arsenal, and those who are interested in buying their very first business.
There is no right or wrong way to come into business, but there are advantages and disadvantages to your approach.
Start a Business or Buy One – Which is Right for You?
Starting your own business is a great way to build your dream job based on your passion or expertise. It gives you the opportunity to tap into your creative side, work on something that means a lot to you, and allows you to share your knowledge and unique experiences on that subject with others.
There are so many reasons why starting your own business could be the right choice for you. For starters, you can literally build the exact business you want. You will have final say over your brand voice, the team you work with – by hiring employees/contractors that you see fit – the hours you work, the services you provide and more.
Perhaps one of the most understated benefits of starting out on your own is that you will understand all the intricacies of your business. When you do it all yourself, you get to know your website, how your sales funnel runs, what is required in terms of technical and customer support and all those other little details that make you appreciate what you have built.
That being said, there are some distinct disadvantages to building your own business.
By far, the greatest risk of starting your own business is investing your time and energy into an idea that has not been validated and has the potential to fail.
This is not your Field of Dreams. The saying, “If you build it, they will come,” doesn’t apply here. You can spend weeks, months, and even years, creating a website with products and services, but that doesn’t guarantee you will get visitors or customers.
When you start your own business, you also have to build a customer base, even though you don’t have brand authority or a reputation to back you. You will have to learn to market your new business, how to sell yourself, and ultimately, you will have to prove that you are worthy of their time and money. With zero traction, this earning a market share can be the most challenging part of online entrepreneurship.
Should You Try Buying a Business Instead?
If the pressures of starting from the bottom feels like too much, then buying a business may be a good option for you.
Not all of us have a vision or passion that we want to infuse into a brand new business, but that doesn’t mean we don’t want to be our own boss. This is when buying a business becomes a path worth considering.
Buying an existing business takes some of the initial start-up struggle out of the equation. How?
Simply put, the previous owner has done most of the initial/major legwork for you. They have built a customer base, created a model that has proven profitability, established systems, policies, and procedures for managing that business.
When you buy, your business already has a solid foundation, so you can focus on improving and growing rather than spending valuable time and money in those early stages. You’re buying traction that can take months (or years) to flesh out.
Being a business buyer might also be a better fit for your skill set. If you’re coming from the corporate world, you might be more familiar with growing a company to the next level rather than starting one from scratch. Online business varies greatly so the kind of business you choose should match your skill set.
No surprise here, but there is a catch – buying a business involves a bigger financial investment than starting your own, and it has some downsides too.
Firstly, the initial investment needed to buy a business varies. The purchase price will vary from tens of thousands of dollars for a small business all the way up to seven-figures, depending on the type of business. For example, the Empire Flippers marketplace values websites based on a multiple of the websites net monthly profit, which means that if you are buying a site with a $10,000 monthly profit, it will cost around $200K – $300K. Not all have the cash flow to pull the trigger on a site like that.
On the flip side, it is much easier to get financial backing for an established business than it is for a startup because people tend to look kinder on businesses that already have established net worth.
Outside of the wild-and-crazy VC’s in Silicon Valley, you might be hard-pressed to find an investor or lender willing to throw money at your “idea”. An established, proven, and profitable business model is much more attractive to your average investor.
Above we mentioned that starting your own business gives you invaluable insight into the behind-the-scenes details of your business. To an extent, the opposite is true when you buy a business.
We have seen cases where the new owner was looking to make “passive income” and completely underestimated the amount of work it would take to keep the current website generating its monthly net profit. It doesn’t help that sellers often downplay the actual time they spend working on the site. This isn’t to be malicious, rather it’s a matter of not properly accounting for their time.
You see, the misconception is that once a site is profitable, you don’t have to put any more work into it. This is not the case for the vast majority of websites out there. The work may be sporadic, but it’s definitely not as passive as the stock market, for example.
Successful websites maintain profit or continue to grow based on the amount of effort you put into it. Affiliate sites still need fresh content, ecommerce sites need good customer service, and these things do not happen with a laissez-faire, “passive income” attitude.
Additionally, when you initially buy your site, it may take time to gain traction again, because oftentimes, the seller has left the site somewhat inactive. This means you need to inject it with even more time and effort just to get the ball rolling again.
That’s why it’s important to do your due diligence when looking to acquire a business. What seems like a good business might not be the right business for your needs. This is something a business broker can help with, they will be able to find targets, give you advice on valuation, and act as an intermediary between you and the current owner.
Unfortunately, first-time buyers who buy a business based on this misconception often end up re-selling that website and losing money on their investment.
Whether you choose to start from scratch or buy your business, plenty of time, energy, and money will end up going into it. Businesses take nurturing to grow, so as long as you walk into it knowing this and are ready to dig in your heels, you stand a really good chance of running a successful business.