Starting a Business or Buying One? Helpful Information to Get You Started

Apr 27, 2022

If your dream is to be your own boss, you can start your own business, or you can become the owner of an existing business. Which choice is best for you? 

Buying an existing business might be a good fit for you if you are concerned about starting your own business from scratch and the costs associated with a new business. When you buy an existing business, it involves taking over an operation that is already profitable and generating cash flow. These businesses typically have a strong customer base and reputation, as well as employees who are familiar with all aspects of the business. Moreover, there is no need to set up new procedures, systems, and policies, since a proven formula for running the business already exists. 

Though it can be more expensive to purchase an existing business than to start from scratch, it’s actually easier to procure financing for an existing business than for a new one. It is generally easier for banks and investors to deal with a business that has already proven its track record. You can also obtain valuable legal rights such as patents or copyrights if you purchase a business. 

Buying a Franchise 

Many feel that buying a business is less risky than starting your own, especially if you can find a well-managed, profitable one—and negotiate a good price. An existing business provides immediate cash flow, and the difficult start-up work has already been done. You’ll have a customer base and suppliers. The business’s financial history shows what to expect—and often makes it easier to get loans or attract investors. 

However, you will need to invest a large amount upfront, especially if the business hasn’t been profitable lately. 

Franchising allows a business owner to open their own branch or branches of an existing brand. A franchise license entitles the holder to market particular products or services under a brand or trademark according to prearranged terms or conditions. In exchange for fees and royalties paid to the parent company, the franchisee can use the business format and systems of the franchisor. 

The main advantages are a proven market for the product or service, and tested and specific operations management policies. The main disadvantages stem from the power that the franchisor has over the franchisees. 

Purchasing an existing business makes it much easier to plan and raise capital, because of the historical records. 

Franchising is becoming an increasingly popular method of establishing and operating a small business. Many entrepreneurs find the opportunity to operate their own business with slightly less risk an attractive option, but operating a franchise is more restrictive than the other two forms of ownership. 

Starting Your Own Business 

There are plenty of advantages of starting your own business. You are the boss! You can set your own schedule, conduct your business your own way, and do things in your own time. If you buy a franchise, you still have a “parent company” overlooking you and your business. Starting your own business means it’s all about you! 

This also means you can bring something new and unique to the market. You don’t have to sell what others want you to sell, it’s all up to you! Plus, depending on your business, you will be paying much less than buying a franchise.  

However, when starting a new business, it may take a while for you to become profitable. This may take months or even years before you start seeing a positive change in numbers. You’ll have to keep your head on straight if you start your own business.  

Lendistry provides economic opportunities and progressive growth for small business owners and their underserved communities as a source of financing and financial education. Contact us today if you would like to learn more! 

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