A reader who had been laid off from his job asked how to start a new career as an entrepreneur and minimize the risk associated with starting a new business.
At the time, we discussed starting a new business from scratch. But there are alternatives, such as buying an existing business; offering your services to companies for certain operations, known as outsourcing; or forming a partnership with another owner.There are six good reasons for buying a business instead of starting one from scratch: time, financing, existing operating systems, management training, lower asset costs and lower risks.
Starting a new venture involves considerable time and effort and usually takes several years to reach profitability. You can own a profitable business from the beginning by purchasing one.
Another advantage to buying a business is to make use of the seller's invested capital. Sometime you can get into the deal with little or no up-front cash. Many sellers ultimately finance a large part of the sale to obtain a higher selling price.
Also, when you purchase an existing business, the organization and the operating system are already in place. The owner has already experienced the pitfalls of startup. Plus you acquire the venture's current customers.
Management training provided by the seller is another advantage. Sellers usually will show the buyer how to run the business and share their inside knowledge.
It's usually cheaper to acquire assets by buying a business than it is to purchase them new. You can often purchase the building and equipment for 10 to 20 percent of what it would cost new.
Finally, by buying an existing business you minimize the risk associated with startups. Much of the market speculation and sales forecasting are eliminated.