Should I Start A Business Or Purchase An Existing One?

Starting a business from the ground up can be challenging for first-time entrepreneurs. If you have an awesome business idea and are prepared to put in the work to build it from scratch, then you may want to start your own business. But if you want to hit the ground running and side-step some of the common start-up hazards, then buying a current business or established franchise may be a better option. Keep reading to learn more about each type of business to help decide which is right for you.

Starting a Business

Positives

  • You have freedom to plan and manage the business according to your vision.
  • You are not held back by someone else’s rules, history or assets.
  • There is an opportunity to carve out a new segment in the market.
  • It can be less costly than buying a successful business.

Negatives

  • It can take time and extensive resources to become profitable.
  • There is no assurance of business success and a very high rate of failure.
  • It can be difficult to obtain financing because banks or investors are taking a risk.

Purchasing a Current Business or Franchise

Positives

  • You can profit from the work that has already been completed on branding, acquiring assets and developing customer relationships and business processes.
  • A franchise can start taking in profits more quickly.
  • An established business model can make it easier to obtain financing.

Negatives

  • The initial investment is often larger than if you were starting a new business.
  • The previous owner or franchisor’s business model and may not match what you envision for your business.

Should I Buy an Indpendent Business or Franchise?

If you purchase an existing business, you have two clear choices: franchise or independent business. Each type of business has several factors to consider.

Franchise

  • A proven track record exists.
  • There is a built-in customer base.
  • Set-up, support and training are provided.
  • There is a pre-determined set of rules and regulations to follow.

Independent Business

  • You have more control and responsibility over operations.
  • There are no fees or royalties to be paid.
  • There is more opportunity and risk.

Conclusion

The facts show that the choice is fairly clear in most cases. Rather than starting from scratch, look for a proven and tested small business with three to five years of demonstrable financial records and tax returns that coincide with the data on the financial statements. Companies like these with trained employees, a good customer base, proper equipment, a record of growth and an established inventory are excellent business opportunities. The failure rates of companies that have been around for at least five years is comparably low to those of new businesses.

Looking for sound legal advice for your organization, business or corporation? Contact KGPC LLP today.

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