Entrepreneurship is a goal for many people. The two most common ways to follow this dream are to found a new business or purchase a franchise of a well-known company. A third option is to buy an already existing business. Although the less-traveled route, the third option may be the best path for many hopeful owners.
Can entrepreneurs really buy already operating companies? The short answer is yes! Businesses go on the market all the time. An owner might choose to sell for many reasons, including exiting the industry or retiring. Further, there are countless advantages for whoever ends up purchasing it. Here are four reasons entrepreneurs should consider buying a business:
1. Financial History
Launching a new company always comes with a bit of risk and uncertainty. Will anyone give the business a chance? Will it be profitable? Unfortunately, no one knows the answers without jumping in head first. Statistically, 20 percent of startups fail within the first year. Want to improve your odds? Consider buying an existing business instead.
Buyers can read and analyze a company’s financials before making an offer. These documents break down revenues, costs, and losses. New owners can see which products are winners and where change needs to happen. Financial data makes it easier to budget and plan for the future. Additionally, having this information gives buyers an upper hand when it comes to securing bank financing.
2. Customer Base
What’s the hardest part of launching a new business? Most would agree that growing a loyal customer base is the most challenging. It takes a lot of time, skill, and creative marketing to attract new visitors. It costs even more to retain them. Instead of starting from scratch, consider buying an existing company with a long list of happy, repeat customers.
An existing customer base ensures an income stream from day one. Long-term customers are also much more likely to participate in helpful market research. Surveys allow customers to tell the new owner what they like and don’t like about the company. This information is extremely valuable as the new owner prepares to make improvements for the future.
3. Trained and Knowledgeable Staff
Purchasing an existing business means not having to worry about hiring new employees. Why is this important? Hiring is expensive and takes a lot of time. Expect to set aside 42 days and pay $4,129 to hire just one new worker. Imagine walking into a business with a full staff from day one!
Knowledgeable employees are priceless. They already know the ins and outs of the business and can assist the new owner as they take over the reins. Some might even share ideas on how to make the company even better.
4. Supplier Relationships
Launching a new business means finding the best vendors. Unfortunately, most entrepreneurs go through several bad apples before locating the right ones. On the other hand, existing companies already have relationships with these key figures. This benefit reduces the risk of running out of stock, selling inferior products, or missing deadlines.
Entrepreneurship Without the Headaches
Being an entrepreneur is exhausting. Every day presents new obstacles. Imagine becoming a business owner without the learning curve. Buying an already existing business is one way to do just this. Having all the financial data, customers, employees, and suppliers already in place makes taking over the lead role that much easier.