Build a startup or buy an existing business?

Discussion in 'Starting a Business' started by stepheny, Jan 20, 2010.

  1. stepheny

    stepheny
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    Is it better to start a new business or buy an existing business that someone is selling? I am looking at owning a business and am not sure which way would be better. I know that with buying a new business there are a lot of startup costs and gaining customers can be difficult and with buying an existing business, there is usually already a steady client base and all the initial costs are taken care of. I am interested in buying a bakery and have found a few on this website: buyabusiness.com . I am leaning towards buying a business that someone is selling instead of building my own from the ground up but am looking for comments from others on what they think would be the best option.
     
  2. Fergal

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    Buying an existing business can work very well for you provided that you buy the right business. Before you buy a business you need to be sure that the business is suitable to your skills and interests, in other words that you have the ability to run it and that you will enjoy running it.

    When looking at an individual bakery business for sale, check;


    • If it has a good reputation in its market place. You don't want to buy a business with a bad reputation. Do the locals enjoy and recommend its products?
    • Check the figures to see that the business is profitable and that the profit justifies the selling price
    • Is the business one that you can improve. Can you see opportunities to make the bakery even better than it was, under the previous owners?
    • Is there a growing market for the bakery's products?
    • Is the premises owned or leased?
    • If the bakery is fully compliant with all environmental health and food regulations?
    • Why the current owners are selling the business?
    • Are there any legal actions or impending legal actions involving the business?
    • Can the business run independently from the previous owner? You need to be sure that the business is not so closely associated with the previous owner that it will not succeed without him /her.
    • The owner will agree to sign a written contract to state that they will not go into competition with you.
    Buying a strong, successful and profitable bakery would have the advantage that you know the business can work. If you decide to start a business from scratch you will have to do a lot of research in advance and you won't have the advantage of the existing profits and customer base.

    Starting a business from scratch has the advantage that you are starting a new and you can set the business up exactly how you want it.

    There is no definitive answer to your question because it depends on the specific circumstances and the businesses involved. Please post back with your thoughts and let us know if you have any further business questions.
     
  3. Clinton

    Clinton
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    stepheny, I'm a great proponent of buying into an existing, proven business.

    I've started businesses in the past and built them up. I've also bought businesses out. So I've seen both sides.

    One word of advice: There are a lot of ways sellers can present a better picture than the reality so if you haven't done due diligence on a business before get a professional in to help with that. It'll be well worth the money spent.
     
  4. bestgal

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    buy the startup!

    If you have the capital. buy a startup, the only reason why i would start it myself would be if i didn't have much starting capital and would need to add value with the time i put into the business from the start.
     
  5. jaguar2

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    re:Buy a startup or buy an existing business?

    hello,


    I think to buy an existing business is better but first you have to see that business that you are purchasing that are in what condition and it's reputation in the market.if the reputation of the business is good then to buy that business is better than establishing a new business.

    thanks
     
    #5 jaguar2, Jan 25, 2010
    Last edited: Jan 25, 2010
  6. eddane

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    Depends how much money you have. If you start it yourself you will learn more...

    Ed
     
  7. Clinton

    Clinton
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    Why don't you do both?

    If you find a business for sale, reach an agreement with the seller then start a new business and "import" the assets from the acquired business into the new one. It gives you the opportunity to dump unproductive parts and make sweeping changes (like staff shifts/lease/tax structure)

    In essence what you'll be doing is buying just the assets of the business that's for sale, not the whole business.
     
  8. Fergal

    Fergal
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    Great suggestion. If you are doing something like this you need to be conscious of the legal and financial implications. Different countries have different laws, but if you did this in Ireland, you would be obliged to pay redundancy to all the staff you let go. That redundancy would be for all the time they worked for the business, including the years they put in, before you acquired it.
     
  9. DEADMAN

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    Only buying existing business won't be cheap and easier.

    You need to look how the business was running? You need to be very serious if business had any problem and is hold for sale. If you buy such business, you'll directly go to loss. The facts can be the business has no enough customers or bad comments on bakery shop.

    It's better and even easier to buy existing business than doing a startup. It will kill more of your precious time for starting a new business. You can put that time on how to gain more customers and make your business more effective.
     
  10. Henry_Jakson

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    If you plan to buy an existing business, carefully analyze both the advantages and disadvantages. One advantage is that a good business history can increase the likelihood of a successful operation and ensure that finance is easier to obtain. Potential disadvantages can be overestimating the goodwill figure and a poor public image inherited from the previous owner.
     
  11. MahaKarthi

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    Liked the answer that details the things to check for in an individual business. My advice to you for a startup would be to try and recruit promising employees and work on keeping them satisfied. Companies like Piterion are market leaders today owing to their expertise and also employee engagement measures. This is a key aspect that most startups seem to neglect these days. Good Luck in whatever you choose!
     

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