Why Buy a Business Instead of Starting One?

By Drew Rutherford

When buyers first explore the world of buying and selling businesses, many ask me why they should buy a business when starting one from scratch can be done so much cheaper. Why buy? The answer lies in what you get when you buy an established business.

What do you get?

1. Would you rather find a good customer or keep a good customer? This old customer service adage is the perfect illustration of what you get when you buy a business – you get customers who are already spending their money at your business. You don’t have to invest in strategies to drive traffic to your business – the traffic is already there!
2. You inherit a proven track record and business model. Existing businesses have a track record of financial performance and operations. You can review financial statements, customer reviews and other historical data to assess viability and potential for growth. Having information to review allows you to make informed decisions and reduce the uncertainty that is often associated with starting a new venture.
3. You get assets and business infrastructure already in place. If you had to start from scratch, you’d need to purchase equipment, set up credit card processing, build a website, hire employees, develop HR policies – I could go on and on and on about startup to-do lists. However, when you buy a business, the assets and infrastructure are already there and, more importantly, they are already working to make money for the business.
4. Cash flow! When you already have customers, a proven business model, and assets and business infrastructure already in place and working, you have cash flow. Experts from every corner of the Internet will share their thoughts on how long it takes for a startup to become profitable, but rest assured it’s not right out of the gate for most of them. When you buy a business, you can invest in an asset that’s already generating a return.

While buying a business certainly has its advantages, it’s crucial to thoroughly research what industry best suits your goals, as well as to conduct proper due diligence of any business you consider buying. Weighing short- and long-term financial needs is also an important factor to consider, as purchasing a business will likely cost considerably more than starting from scratch. Finally, building a team of trusted advisors offers prodigious resources to help you make good decisions – choose professionals who have experience in business acquisitions. Contact us today to learn how Transworld Business Advisors of Knoxvilla and Chattanooga can provide professional, guided help for buying or selling a business!