Tuesday, October 22, 2013

Should You Buy an Existing Business or Start Brand New? Startups, Established Businesses & Franchises OH MY!

When starting a new venture entrepreneurs should consider one big question: Should you buy an existing business or start a brand new business? All too often the entrepreneurs assume that one route is better than the other. The truth is that each event sure is a case by case basis and should be analyzed in comparison to other opportunities.

In this article we will explore buying an existing business, starting from scratch, franchises, and other turnkey business solutions entrepreneurs have when looking to start a new venture.

Buying an existing business.

In general the train of thought is that buying an existing business is easier than starting one from scratch. In a lot of ways it is, but this does not mean that buying an existing businesses any easier. Diligent research should go in before you buy any business. This includes learning about the business model as well as any history or future events that will affect the purchase and running of the business. Generally one searching to buy business wants to take a look at the financial statements which include the income statement, balance sheet, retained earning statement, cash flow statement and notes to all the financial statements by auditors.  Unless the financial statements are audited they should not be taken at face value, and one could argue even if they are audited you should be wary of what you read on paper. Many advantages exist when buying and already established business. There may be suppliers in line or customers on contract. You may benefit from employees already working for the company and you may get a custom made sales or management outline used by the prior owners. The downside to buying a business is generally the amount of capital needed or that you may be buying a losing proposition.

Starting a business from the ground up.

Many entrepreneurs will tell you that this is the most fun way to go, but with the most hurdles. The bonuses of starting a business from scratch are you can start small, you know you're not getting anyone else's problems, you'll be able to grow with your business, and you can create a legacy and culture which is your own. The downside to starting a business from the ground up include a great deal of unknowns, a higher probability of failure and the scarcity of revenues at the startup phase.

Franchises and other turnkey business opportunities.

When looking directly at franchises as an entrepreneur the pros of the opportunity are extremely lucrative. Franchises account for much of retail sales around the world and lead to a bigger market potential initially. Very small percentage of franchise operations fail and you don't need a ton of business experience to run many franchise opportunities since most things are worked out by the franchise companies. You also can lend the franchise companies trademarks and notoriety to your advantage. Disadvantages of buying a franchise are commonly quoted to be that you are really not your own boss, a franchise is it really your business, you got to hand back a percentage of the cost and revenues to the franchise company, and some franchises are expensive to buy hey might not be available where and when you want them.
Other turnkey models exist for entrepreneurs wishing to purchase a business. These turnkey models are somewhere between a startup company and a franchise. They generally give the opportunity of a model that is proven, but not yet working. An example would be web sites that offer drop shipping products for a buyer to run, while it is not an established business or franchise, is simply need someone to market the website in order to generate profits.

The Close

No matter whether you are starting a business from scratch, buying an existing business, looking to purchase a franchise or turnkey business, you will only need a few tools in your belt to accomplish either option successfully. First and foremost you must be diligent in your research. Never stop digging and searching for more data pertinent to your business. Negotiation is the next thing in your tool belt. You will need to know how to negotiate for all aspects of your business, so get good at it. Lastly you will need a business plan and a team. Bounce your business plan off of your team, and have your team help you write your business plan. Make sure you are researching and negotiating while you are writing your plan, but never lie to yourself.
Hope this helps...

The MicroCapCompany Team
Follow Nicholas Coriano on Twitter


About the Author: Nicholas Coriano is a Business Consultant and Planning Guru.  He is a graduate of The University of Connecticut Business School and the John Marshall Law School in Chicago.  He has worked at Merrill Lynch, The New York Stock Exchange and as an Investor Relations Agent & Consultant to Micro Cap Companies and Penny Stocks.  He is the founder and author of The MicroCapCompany.com a blog focused on providing information and advice to Micro Cap Company Executives and Investors.  You can also find him blogging about Social Media, SEO, Web Development and Tech on PushYourRank.com

About MicroCapCompany.COM: MicroCapCompany.COM (The Blog) is a blog focused on providing articles, news and information on the micro cap sector and start-ups.  The Blog is a free service offered by Cervitude™ Investor Relations (a micro cap investor relations firm) and offers compensated research reports and business plan writing services for micro cap companies and penny stocks.  If there is a particular topic you would like to see covered on The Blog, email CervitudeNetwork@gmail.com, If you would like to advertise on The Blog, click here

Have tips, advice, comment or suggestions about this article??  Comment below or start a conversation by mentioning us on twitter!

No comments:

Post a Comment