If you want to thrive in business, you need to learn to create something instead of simply being a consumer on the market. That is a fact that is an immutable fact upon which the act of running a business is built. Whether it’s a product or a service, any business revolves around the creation of something that is of use to consumers.
The beauty of a business is that as long as someone needs whatever product or service that you’re selling, you can make money. Many businesses have long outlived their founders and many have even grown. Established businesses are exactly that – established.
They have earned and held the trust of their customers for so long that their reputation is bound to precede them.
But we now live in an age of innovation. While old and trusted brands are nice to have, with the advent of the internet, smaller businesses seem to have a much better chance of growing. There are startups popping up everywhere and the markets have never been so saturated. And yet, there are a few who are able to disrupt the market enough to make a name for themselves in a short span of time.
So, this now, begs the question of whether you’re willing to take the risk of building a business of your own, or should you simply buy (or buy part of) a business.
Initial Cost
While starting a business on your own is going to cost money, buying a business that has already been established is going to come with a hefty price tag. This is due in large part to the fact that you’re buying something that’s tried and tested that’s fully grown and scaled, compared to a start up. Previous owners have already put in the time, money, and effort to get the business to its current state. You’re essentially paying for these things along with employees who are ready to get to work, existing business assets, and of course, a loyal customer base.
You’re also, in a way, paying for their mistakes and the experience that came out of those mistakes. With that said, it’s also important to evaluate the value of the business that you’re planning to buy. Remember that if it’s not making any profit, then, revenue isn’t going to mean much. You want a business that’s earning, not one that you have to build.
It’s also important to note that you don’t necessarily have to buy the entire business in order for you to gain influence over how it operates. You can consider buying private equity in order to gain influence over a business. And if this is the first time you’ve heard of private equity, then this collection of private equity career resources might help get you up to speed.
But to give you an idea about how much private equity normally costs. The minimum amount of capital required for investors can vary depending on the firm and fund. Some funds have a $250,000 minimum investment requirement while others require millions of dollars.
Financing
Established businesses are more likely to get financing as opposed to startups. This is also because of the reputation and the predictability that an established business already enjoys. This is true whether they’re trying to acquire finances through loans, investors, or through venture capital. The reason behind this is that established businesses are unlikely to fail.
On the other hand, startups can be a bigger gamble since they are an unknown entity without an established market, or any growth to use as a forecast. Investors and lenders are all about minimizing risk and investing in something that has been tried and tested is the way to go.
Reputation
One of the most important aspects of a successful business is its reputation. A business reputation doesn’t just affect how loyal its customers will be, it will also affect how other businesses interact with it. When a reputable business wants to expand, it’s likely to gain a business partner that’s also successful. Nobody wants to link their boat with a sinking boat, after all.
Internal Problems
Now, before you start complaining that this seems to lean heavily on buying a new business instead of building one, you need to take one thing into consideration. If you buy a business, you’re also acquiring the problems that plague it. While a business may have already been established, not all problems are immediately visible. And even worse, you may not know the right way to handle these pre-existing problems.
When you build your own business, you know it inside and out and you get to prevent problems before they even arise. You get to choose which issues are tolerable and which aren’t. It’s pretty much like choosing between buying a brand new car or one that’s already used, with hidden issues.
It’s for reasons like these that you should choose carefully where to put your money at. And well, the best course of action, really is to consult with a professional before making a move, especially because this differs between would-be business owners.