Making the decision to go into business for yourself is a big one. It’s a bold step that requires a lot of work up-front – in terms of research and due diligence – to make it successful. Usually, the first question people ask themselves is, should I start my own enterprise or buy an existing business?
Whilst there’s no right or wrong answer to this question, you do need to look at the facts. We need entrepreneurs in Australia, that’s a given; without them, the country would stagnate. However, for the majority of people, buying an established business is the best option.
Starting your own business is exciting; you’ve come up with an idea which you consider to be unique or in-demand or life-changing, and you’re keen to make your mark. But amidst that excitement, there’s the harsh reality of handling a start-up.
Customers and Cash Flow
In truth, you’re starting from zero. However good your idea, you are starting with no customers, and therefore no cash flow. You need to consider location, premises, marketing, staffing, loans and fees, fit-out and so much more.
Can you afford to run at a loss for however long it takes? Can you handle the stress? Can your family handle the impact of starting a business? These are crucial questions to ask yourself.
You may decide that buying an existing business is a better fit for you and your lifestyle. When you buy an established business, you are taking over an enterprise that is already generating cash flow and profit. You are inheriting an existing customer base, which can be grown, and (hopefully) a good reputation.
Goodwill and a good name are amazing assets to have from Day 1. If the trained and experienced employees are happy to stay on, you have the trifactor!
Remember, it’s easier to change and improve existing systems and procedures than create them. There’s already something there to work with, knowing that whilst you’re doing that, money is flowing into the business.
It is easier to finance an existing business, too. A lender will be more comfortable looking at profit and loss statements than listening to your hopes and dreams. Yes, that’s harsh, but it’s also the reality at a time when loans are hard to come by.
Do the Groundwork
However, buying an existing business still demands that you do your homework first. It cannot be stressed enough how important due diligence is. Before you even start looking for a business to buy, you need to decide WHERE you want to be, WHAT industry you want to enter, and WHEN do you want to start?
Where do your skills lay? If you are taking over a business with amazing knowledgeable staff, you don’t need to be an expert in that field.
Do you want a lifestyle business, just to tide you over until retirement, or do you want to buy a business that you can take to the next level?
A good place to start is Coast to Coast Businesses for Sale. Covering all geographical areas, and many different industries, you’ll find an amazing choice of businesses for sale, as well as invaluable information on buying and selling businesses in Australia.
Disclaimer: Chan & Naylor takes no responsibility for the accuracy of any research material of contributors to our newsletter. Contributions to our newsletter like this post, “Start-up vs Established Business: Which One’s Best for You?” are meant to be educational only, and Chan & Naylor does not endorse any promotional material promoted in their articles. Readers should do their own research to determine the accuracy of their material.