Why Build A Business From Scratch When You Can Buy One?
There are so many different ways you can get into business these days. You can build one from scratch based on something you are passionate about, or partner with someone who has an existing model, but lacks your particular expertise. You can even buy a business — a service and choice we obviously stand behind!
The reality is that not everyone wants to go into business because they have a passion project in mind. Many simply see business as an opportunity to become financially secure, an achievement which will ultimately help them create the lifestyle they want.
And there is nothing wrong with this.
There are plenty of reasons why starting your own biz from scratch is great, but today we wanted to break down a few reasons why buying a business might be a better investment of your time, energy, and money.
The Advantages of Buying a Business
When it comes down to it, starting your own business requires a lot of man hours. There’s sweat, blood, and often tears. You end up working for pennies (or nothing) in the hope that it will pay off. Fortunately, buying a business allows you to potentially skip months or years worth of hardship.
Why? Because someone else has done the initial hard work to get traction.
Laying a strong and solid foundation for a business is tedious. You must grow your audience, create a product or service that is desirable, sellable, and profitable. Further, you have to establish systems and procedures that let you manage the business efficiently.
As a buyer, you will want to put in the research hours necessary to ensure that the business you are interested in acquiring actually possesses this healthy foundation. The good news is that this process requires only a few hours of your time.
Online marketplaces like Empire Flippers allow you to view data and analytics so you can gauge how viable a business is. They also give you the opportunity to communicate with sellers, often directly, so you can ask questions and fill in any blanks before purchasing.
Once you’ve determined that a business is worth buying and you complete the deal, you get to dive right into the fun stuff. In most cases, your freshly acquired business lets you start making money right away.
Rather than struggle to make the first sale, you can focus your time on tweaking and improving the business. You can reinvest the money you make right back into the business. Where many newbies don’t have the budget to test out paid ads, you have a little more flexibility. Leverage this.
Paid ads and other traffic and sales boosting tactics can significantly increase your future business revenue. Since you already know the business makes money, you can focus your efforts on this.
You’ve bought a business that already has traction in the marketplace. This is something that many people literally spend years building out.
Perhaps the biggest advantage of buying your own business versus creating one is that you have already bypassed the biggest hurdle: failure.
There is an incredibly high rate of failure for those just starting out in businesses. This can be attributed to not understanding your audience, failing to create a product that solves a big enough problem, or simply not having the time and money to focus all of your energy on its success.
When you buy, this risk has already been assumed. You know the business is established, running, and profitable. A bonus advantage to this is that you are more likely to attract additional financial backing from investors because you already have a proven model.
Not surprisingly, venture capitalists and investors feel more comfortable backing a business that is already established and producing positive results.
The Disadvantages of Buying vs. Building
Though there are plenty upsides to buying a business, there are also a few notable disadvantages.
The most obvious disadvantage is that you will require plenty of cash up front to actually buy the business. If a website has a monthly profit of $10,000 then it will likely sell for somewhere between $200k-300k. Not everyone has that kind of cash lying around to leverage.
Although I noted that finding investors is difficult for startups, as someone looking to purchase an established, profitable website, you may be able to attract investors. You could also looking into borrowing money from a company like Lendvo.com or using a 401k. Just make sure you know exactly what kind of agreement you are entering into before accepting the money.
Another notable disadvantage is that you may not get the exact niche or industry you want. Sometimes the marketplace doesn’t have what you are looking for, but that doesn’t mean that the websites and businesses available aren’t worthy investments.
Finally, the last disadvantage is that an established business may come with legacy problems. What I mean by this is that you may have to iron out coding kinks, handle staffing issues or grandfather in current customers at a lower rate so you can bump up your profit margin for new customers, among other issues. Luckily these are all manageable issues and ones that shouldn’t take too many weeks or months to fix.
Regardless of which direction you take, your business will require nurturing. Success doesn’t come to the lazy or ignorant. Whether you’re building or buying your business, you are going to put in some hours and elbow grease. It just may happen that when you buy a business you typically end up spending far fewer man hours at a better return on your time.
Knowing both the advantages and disadvantages, tell me, would you rather buy a business or start your own from scratch? Share your thoughts in the comments below.