Why is it beneficial to buy running business rather than setting up a new business?

Why is it beneficial to buy running business rather than setting up a new business?

When most people think of starting a business, they think about beginning from scratch, developing your own idea and building the company from the ground up. But starting from scratch presents some distinct disadvantages, including the difficulty of building a customer base, marketing the new business, hiring employees and establishing cash flow. All without a track record or reputation to go on.We at Kapso Business Services, India's leading business brokers help small medium enterprise owners who want to Buy a business or Sell a business and guide them through the process and make sure they achieve their goals

Here are ten reasons why you should buy a business rather than start a new one.

1. Easier to secure finance

Most lenders are more confident in lending money to buy a business that is established rather than supporting an unknown start-up. From their perspective, there is less risk associated with financing a business that has already demonstrated itself and can generate income.

2. Income from day one

Most start-ups go through an initial phase when they do not generate an income initially, this can be three years or more. During this period, it may be necessary to shell out money for equipment and its installation, initial stock and materials, fixtures and fittings, legal and professional fees, a license, uniforms, etc.

Without finance in place or an alternative income, this stage can be difficult for new business owners and it is easy to become demotivated.

3. Established brand

When you buy a business, you essentially buy into a recognisable brand with a track record, complete with all the trademarks, copyright and websites associated with it. This gives customers, suppliers, lenders and other contacts a confidence in your business that they may not have when interacting with an unknown start-up.

4. Instant customer access

An existing business also has customers base ready. You can use various strategies and marketing to build on that customer base, but you don’t need to build it from scratch.

5. Established network of contacts

A large chunk of the time and energy involved in starting a business goes towards establishing a network of contacts. Good supplier and marketing contacts are a valuable asset to any business and if your new enterprise has some on their books, you will hit the ground running.

In addition, like money lenders, suppliers and marketing companies are more likely to offer favourable terms to a business that has been around for a while.

6. Focus on growing the business

With a start-up, an entrepreneur has to channel all their energy into getting the business off the ground and this can be time-consuming and exhausting.

In contrast, to buy a business that is already established means you are free to focus on the particular parts of the business that most need attention, aiding the growth of the enterprise as a whole.

7. Income to put back into the business

With a start-up, lack of finance to do what you really want with the business can be frustrating. Cash is eaten up in buying the resources needed to get things up and running, and dreams are left by the wayside.

When you buy a business that is already established a steady stream of income,you have more freedom in how you choose to re-invest this money.

8. Trained employees in place

Just as it takes time to build up a network of suppliers and other contacts, it also takes time to build up and train a team of employees. These people are already in place in an existing business.

This can make it easier to implement strategies for growth and development. It also means there is a trained team that can keep things running if you want to take time off.

9. Less risk

There is obviously less financial risk for lenders involved when the startup buys a established business and it is also a safer option for the potential business owner.

Providing the business is doing reasonably well, it should continue to do so. In contrast, starting a new business is a jump into the unknown as far as financial security is concerned.

10. Less work

Starting up a new business can often become all-consuming. With so much to do, it is easy to allow the business to completely take over your life.

Those who don’t have huge amounts of passion and energy for the business can find that they begin to resent this.

To buy business that is established means that business practices have been streamlined and with existing employees who know the ropes, it won't be necessary to work around the clock.