Should You Buy A Business Or Start A Business?

Here are some things to consider when deciding your path forward to business ownership.

Factors driving business acquisition

Business decisions should never be made with tunnel vision. It’s crucial to consider the economic landscape when deciding your next move. In the age of a global pandemic, labor shortages and inflation, acquisitions are on the rise.

Here are some of the top factors driving the increase in business acquisitions.

The pandemic

The COVID-19 pandemic has changed the way we do business, including how one ventures into the world of entrepreneurship. Two of the biggest motivators for business acquisitions are acquiring new talent and technology. By taking over an existing business, you’re able to do more with less.

While the pandemic is slowly but surely coming to an end, we can expect its effects to last for years to come.

Labor shortage

The persistent labor shortage is also a driving factor behind business acquisitions. With competition at an all-time high, it’s harder than ever for businesses, especially new businesses, to build and maintain a workforce.

Inheriting employees who are familiar with all aspects of the business is a huge perk of acquisition.

It’s less arduous

Purchasing a business that's already in operation means that you're taking over a company that's already generating cash flow and profit. Even better is the fact that you'll inherit an established reputation and customer base.

Buying a business may also open the doors to all sorts of valuable legal rights, including copyrights and patents, which can prove to be quite profitable.

Be aware of the expenses

On the flipside, buying a business typically has higher upfront costs. But many find that it's much easier to get financing to acquire an existing business than starting one from scratch. Lenders and investors feel more comfortable dealing with an existing business with a proven track record.

How to buy the perfect business

As with anything in the business world, nothing is certain. Buying an existing business doesn't guarantee short and long-term success. If you're not careful in your decision making, you may be stuck dealing with uncooperative employees, obsolete inventory, and outdated distribution strategies.

With business acquisitions more popular than ever before, entrepreneurs around the globe are seeking the perfect business. But, the right business for you isn’t going to be the same as someone else.

So how do you find the perfect business? Here are some tips and tricks to guide you.

Choose an industry you understand

As an entrepreneur, chances are that you have some experience in business already. Make use of your experience and buy a business in an industry that you understand and are familiar with.

Take some time to think about the type of business that you’re interested in acquiring. Consider your skills and experience so that you don’t invest your money into a company that is completely foreign to you.

It’s also important to consider the size of the business in regard to sales, number of locations, and workforce size.

Geography matters

Just as you pay attention to geography when buying a home, the same stands true when buying a business. Figure out the general area in which you want to own a business. Then assess the cost of doing business in the area, such as wages and taxes. It’s also important to do some research into the labor pool.

Once you’ve selected an industry and region to focus on, research the businesses that are on the market. You can find business acquisition opportunities by looking online at sites such as www.bizbuysell.com 

Be aware that not all business owners list their business for sale. Spend some time talking to business owners in the industry and region of your choice. While an owner may not have their business on the market, some may consider selling with the right offer.

Business acquisition is a great time to put your business contacts and networking abilities to work.

Create an acquisition team

The more people you have in your corner, the better. Your acquisition team should consist of an accountant, banker, and attorney to guide you through the process. Each of these advisors are essential for reviewing and verifying all of the pertinent information about the business you’re thinking about buying.

Before acquiring a business, there are some basic questions you’ll want answers to, including:

• Why is the business for sale?
• What’s the business’ outlook?
• Does the business have enough market share to remain profitable?
• Is there an abundant supply of necessary labor, technology, products, etc?

It’s also crucial to assess the company’s reputation and business relationships. Talk to existing suppliers, vendors, and most importantly, customers. Ask them about their relationships and experiences with the business.

You’ll also want to gather information from licensing and credit-reporting agencies, industry associations, and the Better Business Bureau.

Final thoughts

Building a brand from scratch is daunting. Buying an existing business is a way to avoid all of the learning curves and pain points that startup entrepreneurs experience. Acquiring a business that has developed a customer base, vendor relationships, operational procedures, and trained employees is a huge perk.

Existing business also has brand recognition, a track record, and most importantly, stability. With half of all businesses failing in their first five years, making the decision to acquire a business is a safer, faster, and easier way to turn your entrepreneurial dreams into reality.