Advantages to Buying a Business
There's no doubt that launching your own business is a risky plan. You can run into all kinds of challenges — some that you'll expect, and some that you won't — and it can become tiring to come up with solutions to all of them. So, in some cases, buying a business can provide distinct advantages. As briefly mentioned in Chapter 3, the four key reasons to go the purchase instead of start-up route are location, time, money, and competition (market share).
Location
Since many areas restrict the business activities that you can conduct in residential-zoned areas, you might have to consider moving in order to open the business that you've decided on, especially if it's retail-based. And, as long as you're moving, you might want to look for a good location that has not only the right building, housing, road access, parking, and so on, but also has just the kind of business that you want to run. If the owner is selling, and the price and other considerations are right, buying the entire business might be advantageous.
If you want to run a kennel, for example, but you know your neighbors will object, consider buying an existing home-based kennel business. An established kennel is likely either located within an appropriate zone, or “grandfathered” into a zoning variance. If the location, reputation, and customer base are all sound, it could be worth buying both the property and the business.
Time
No matter what kind of business you want to start, it will take you some time to establish it and to create a customer base. If an established business of the same type already has 250 loyal customers, how long do you think it would take you to reach that same level? One year? Five years?
Money
Will you be profitable when your business is initially growing? If the answer is “no,” how much would you have to invest in order to stay in business? Would it cost more or less to buy the already established business? In this case, buying a business might yield a profitable operation virtually overnight for no more than it would cost to invest in your own start-up business.
Competition (Market Share)
North American business is based on the concept of competition. If you can beat the other business's quality, customer service, or price, you can earn your share of available customers. But sometimes a competing business is so well established and the size of the market so fixed that there might not be room for more than one business to provide a specific product or services.
For example, if you have your heart set on running an automotive detailing home-based business, but the area you live in is small, and there are already two automotive detailers who've been operating for years, then you'll be facing stiff competition. But you might find it possible to buy out one of those two existing businesses. If the price (among other things) is right, then buying can eliminate the competition problem.
