Posted 02-02-2015 9:34 am by
Imagine that you currently work at a corporate job, and you yearn for some freedom. You dream about being your own boss, setting your own schedule, and having more control over your life. What’s the first thing you do? Quit your job and start your own business, right?
Not so fast. As you have probably heard, 90% of startup businesses fail within the first 5 years, and 90% of those that survive the first 5 years will fail in the next 5 years. You have probably debated back and forth with yourself. Is it really worth all the risks to leave behind your steady paycheck and plunge into an endeavor that may or may not work out? Is it really worth putting most, if not all, of your life savings into starting this new business that may or may not turn profitable?
Before you get scared or discouraged with the idea of owning your own business, realize that there is an alternative to being your own boss without the huge risks associated with starting a business. The alternative is to buy an existing business. There are business owners looking to sell their business everyday. The reasons can range from retirement to partnership issues, from a desire to relocate to new business interests. The point is that most people wanting to own their own business never consider the idea of buying an existing business as an alternative to starting a business from scratch.
The question you are thinking now is probably something like this: “But isn’t buying a business more expensive than starting a business?” That, ladies and gentlemen, is the million-dollar question. It is the number one myth amongst business buyers. The truth, as it turns out, is that buying a business is actually cheaper than starting a business.
When you buy a business, you have a steady stream of customers from day one. For many entrepreneurs who start a business from scratch, it can be 18 months before the business turns to profit. That means you as the entrepreneur is paying all the vendors, paying all the employees, and paying for all the overhead of the business using money from your personal bank account until your business turns to profit. Contrast that with buying a business - many times, you turn to profit right away.
As a business buyer, you get to focus your energy on taking an existing business to the next level. This is very different from someone who starts a business from scratch and spends all of his or her energy just trying to get customers in the door. When you buy a business, there is less uncertainty, which translates into reduced risks. Banks know this as well, so banks will likely finance the purchase of an existing business, but not someone who is starting a new business from scratch.
After all startup costs, customer acquisition costs, and opportunity costs have been taken into consideration, it is actually cheaper to buy a business than it is to start one. If you have ever wanted to own your own business, an existing businesses for sale might just be the right fit for you.
Aaron Muller is a business broker in Washington State who has sold over 120 companies and facilitated over 40 SBA loans for his clients. Contact Aaron at (425) 766-3940 to inquire about buying or selling a business.