To Buy or Start a Business
To Buy or Start a Business
In Shakespeare’s Hamlet, in the opening line of the Nunnery scene, when contemplating suicide, Hamlet asks “to be or not to be, that is the question”. Hopefully, you are not contemplating suicide, but you may be contemplating whether or not to buy or start a business. For many prospective entrepreneurs, that is the question – to buy or to start.
Generally speaking, it is almost always less risky to buy a business than to start one. It may look less expensive to start a business until you factor in the working capital that will be required to get the business to the point of profitability. When you buy a business, you are really buying established cash flow. You are also purchasing the customer or client base that is generating that cash flow. Accordingly, buying an established entity is almost always less risky than starting a business. Many prospective entrepreneurs have taken waste of time courses in entrepreneurship that gloss over this. Building a loyal customer base is the most difficult part of starting a business. This is the reason people buy a business.
Prospective entrepreneurs almost always underestimate the difficulty, expense and time required to build a loyal customer base. They under estimate the competitiveness of the market they are entering as well as the fact that customers that are buying from an established business for a long period of time do not easily make a change. By underestimating the time required to build a loyal customer base, they run of cash before they have even gotten started.
Nevertheless, there are circumstances and situations whereby starting from scratch is the logical approach. If you do decide to start a business as opposed to buying one, I suggest that you ask yourself the following questions.
1. Uniqueness – Is there something unique about the business that I am planning to start. Really unique. Not kidding yourself unique.
2. Capital – Do you have sufficient capital to support yourself and the business for at least three years. If you do not have sufficient capital, you are probably going to fail.
3. Marketing – Getting some businesses off the ground requires extensive networking on the part of the promoter. Not everyone wants to go to networking meetings at seven in the morning, or wine and dine people that they may not really like. If doing this is not consistent with your personality, you are probably better off starting a business where the promotion of it is more passive or buying an existing entity.
Most important, do a great deal of self-assessment, both of yourself and the market you are planning on entering.
CROWN BUSINESS BROKERS, LLC UPDATE:
So what’s going on with Crown Business Brokers here in New Jersey, the Garden State? And come on, no corny jokes. Like why is New Jersey called the Garden State? Because landfill, trash, nuclear dump and refinery won’t fit on a license plate. Actually, New Jersey is a beautiful place once you get out of its Northeast corner.
Anyway, over the past month we’ve listed three childcare centers and are getting significant activity. In January, we are also going to be listing a mid-market services business. We are also in the process of reaching out to New Jersey commercial real estate brokers and forming alliances with them. Commercial realtors often have knowledge of the impending sale of a business but have neither the desire nor the expertise to sell it themselves. If you are a New Jersey commercial realtor and would like to partner with us, we’d love to hear from you. We have a generous commission sharing plan. Lastly, we are forming an alliance with a successful loan brokering company located in central New Jersey so as to be able to offer our clients a more efficient way of obtaining funding for their projects.
Geoff Caplan of Boca Raton, FL has also redesigned our website and is optimizing it for us. Brad Palmer, Managing Member of Crown Business Brokers, LLC is writing these blogs, and Geoff is posting them for us. The blogs are attracting increased attention, and so far all of the comments have been complimentary. If you would like to discuss your website with Geoff, you may contact him at (954) 778-0040.
We expect business next year to be good. It is a presidential election year and, somehow, things always seem to improve in a presidential election year, regardless which party is in power or the election prospects of either party.
If you would like to discuss the sale of your business, purchasing a business, or any topic that you have read about in these blogs, please feel free to call Brad Palmer at (908) 931-9300, or by email at email@example.com. We always love hearing from you.