According to the Small Business Administration (SBA), about 90% of new businesses fail within the first year. These figures show how difficult it is to set up a business from scratch. However, whether you decide to start your own company or purchase an existing one, each alternative has its own set of advantages and disadvantages.
There are a number of factors that you should think about before making a final decision. This is a complex matter and it can be difficult to know the best approach if you’re new to the world of business. As a result, bringing in a consultant like Hodge Bakshi, professional accountants in Cardiff, can help you to assess your individual situation and make the most prudent choice.
Having said that, here are some general tips and advice to put you on the right path.
Starting a Business from Scratch
Starting a business isn’t easy. It involves planning, vision, funding, the right team, leadership, and a slew of other factors. Answering the following list of questions will help you to decide whether it’s the right approach for you.
- What is the underlying concept of your company?
- What will be the primary focus of your company?
- How will your business differentiate itself from its competition?
- Do you have sufficient funds to cover all of the costs associated with starting a business?
- What marketing methods will you employ? How will you persuade customers to buy your products or services?
- Who will be your target audience?
If you don’t know the answers to these questions, the first step will be to do some research and think through these issues.
Unique Ideas vs. Established Concepts
Suppose your company wants to offer clients something unique that has never been seen before. In that case, launching your own company is the only way to go – because finding an existing company with the same idea as yours will be virtually impossible. Furthermore, if you happen to stumble onto a comparable business by coincidence, you may have difficulty keeping it on the right track.
Compared to starting a business, purchasing an existing firm comes with constraints and conditions. You will be expected to work with the same team and tempo, which may slow down your progress toward achieving your goals. On the other hand, starting a business gives you the freedom to make your own rules and select employees who can work at your desired pace and meet your objectives.
Your budget is one of the most crucial factors to consider. You may not be in the best possible position to design your business according to your needs if you lack sufficient funding. However, if your needs are modest, a small amount of funding will be enough to get your business off the ground.
Only some people are born with the ability to lead. Buying an existing company necessitates leadership skills because, without it, the business will quickly fall apart. When you acquire an established business, you are taking over all of the assets associated with the company.
This also includes employees – you’ll have the options of forming a new team or sticking with the team members you already have. Retaining existing employees means hanging on to the knowledge and skills that helped to build the company in the first place. However, you’ll also need to build a strong relationship with the team and establish their trust.
When Is the Right Time to Buy an Existing Business?
The ideal time to buy an established business is when you know you can add value to the company. There’s no use in becoming a business owner if you’re not prepared to take on all obstacles and set the business up for future growth. Also, before making any decision, it’s critical to research the existing company’s history and make sure it’s a good fit.
What if You Don’t Have Enough Funds to Buy a Company?
Suppose you’ve found a prosperous firm that has the potential to expand further in the future and fits with your goals, but you lack the funds to buy it. So, what are your options then?
Raising capital can be done in a variety of ways. To purchase an established business, you could apply for an SBA loan, funds from ROBS, or an IRA. You can even strike a deal with the seller on your own terms, such as paying an advance and then payments over time, with an agreed-upon deadline with interest. This will eliminate the need for a loan or financing, and the seller may be pleased to receive a bonus from the transaction.
Both starting a business from the ground up and purchasing an existing company have their own benefits and drawbacks. Either way, you’ll need to be prepared for the challenges of running a business and have a strong plan for future growth.