Assembling the Team
Whether your decision is to buy or build a business, you will find that it’s not something you can do entirely on your own. Often a prospective buyer is anxious about spending money before they have a done deal, not wanting to spend money just to eliminate prospective purchase opportunities. Except perhaps in the rare circumstance where the buyer is a very experienced acquirer in the particular industry, and the sale is a fire sale, it is essential that the buyer perform due diligence to avoid a bad buy, overpaying for a business, or avoiding undue future exposure to liability. I liken this to the process of buying a home.
0 Comments
Market and Industry Investigation
The number one reason people opt to own their own business rather than work for someone, according to U.S. News & World Report, is the satisfaction that comes with being their own boss. This is true even though entrepreneurship generally comes with higher stress, longer hours, and more risk. (http://money.usnews.com/money/blogs/outside-voices-small-business/2009/01/12/why-do-people-become-entrepreneurs ) Sometimes the motivation is the desire to create a job for themselves or possibly for family members, long term financial planning, or a particular passion or interest. Once the decision is made to take the leap, in addition to deciding the type of business, a prospective business owner may consider two very common routes to ownership: starting the business from the ground up, or buying an existing business. Proponents of buying an existing business will say that it provides immediate cash flow, along with market position. If the purchased business can demonstrate a sufficient level of cash flow, it is usually easier for the buyer to obtain financing to purchase the business than to finance a start-up. Typically the business comes with experienced employees and an established customer base, both of which reduce the immediate need for expertise and time investment by the buyer. On the flip side, you are paying for that existing income stream, so the initial cost may be significantly higher. If you can afford to support the business in its early days and delay drawing a salary, starting from the ground up may be a better option. While you won't get the benefit of someone else's experience, you also won't inherit their bad habits. |
Categories |