5 reasons to buy an existing business than start from scratch
You’ve thought about it long and hard, and you’re ready to venture out on your own and start your own business. But have you considered buying an existing business as opposed to starting your own company? Here are our top 5 reasons why buying an established business is a better choice than starting from scratch.
Risk
The most important reason to consider buying a business, is that the startup failure rate for newly launched businesses is extraordinarily high, particularly in South Africa. Statistics reveal that 80% of start-ups in SA fail within the first three years of operation, largely to the lack of support. If you are not a risk-taker, consider buying a seasoned business with three to five years of verifiable financial records and tax returns that coincide with the data on the financial statements. “Businesses that show a record of growth, have employees, a good customer base, proper equipment, and an established inventory, are excellent business opportunities. In fact, the failure rates of businesses that have been around for at least five years is quite low, “ says Ferdie van Greunen, Director of Aldes Business Brokers.
Brand
If you want to start a business that is strongly identified with your personalised brand, it might be best to start something new. You will be able to build your own brand, design its look and market it to the world. Be aware though, that laying the foundations of a brand, takes huge expertise and has massive finacial implications. “If you would prefer focusing your efforts on business growth rather than laying the foundations, then buying an existing business is a better option,” Van Greunen explains. The on-going benefits of any marketing and brand building the previous owner has done will transfer to you.
Income
Buying an existing business means that you receive Immediate Income. Compare this with startup where it will take you some months (if not years) to establish a consistent income. People tend to forget the importance of cash flow. If an existing business delivers a monthly income of say R50 000 it means that after 6 six months your R300 000 better off than starting from scratch.
People
When buying a business, one of the most valuable and important assets you’re buying is the people. It took the previous owner time to find the right employees, train them and develop them. “If you have the right people, the culture of the business is set and it is much easier to implement growth strategies. You needn’t worry about training and you have a base of existing expertise on which you can draw,” Van Greunen says.
Customers / Clients
Most importantly, with the purchase of an existing business, you will be buying an existing customer base and vendor base that may have taken years to build. You might even be able to arrange with the seller to stay on for a short time and transfer those relationships to the buyer.
Becoming your own boss always involves a risk. When you buy a business you will pay for and receive goodwill already established in the business and you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a startup.
So what are your chances of finding such a business? Aldes Business Brokers are the undisputed leaders in the business broking industry in Africa. Whatever type of business you want to buy, we have the specialists to help you find the right business for you and help you through the process. Talk to us today or go to www.aldes.co.za for more information.