Many people hesitate to start a business because they worry about the financial risks of doing so. Furthermore, they know if they fail the emotional consequences can be devastating. Fortunately, there are ways to mitigate the risks associated with starting a new business. A person can find a mentor to help guide them through the process.
Additionally, they can choose to purchase an existing business that has an excellent market share and a proven record of positive cash flow. An established business often comes with wonderful employees who are dedicated to helping the new owner succeed. Research shows entrepreneurs who choose to purchase an existing business have a much better chance of remaining in operation for five years or more than those who start from scratch.
If you would like to buy an existing business, start your search for an opportunity at cgkbusinesssales.com. Why should you purchase an existing business? What are the benefits?
Mentorship
In many cases, the current business owner will stay on to help the incoming owner and ease the burden of taking on an organization. The mentor becomes of great help when ordering merchandise for the busy season, introducing customers to the new owner, and ensuring all documentation is completed properly and on time.
The mentor introduces the new owner to individuals that will be of benefit to them as they move forward with their venture. Additionally, they work with the owner to develop a positive company culture. This plays a large role in keeping employees motivated and committed to the company.
When a decision must be made, the owner can discuss it with the mentor to determine which path to take. People often assume starting a business is the hard part. Actually, it’s harder to maintain the business and keep it growing. The mentor helps the new owner develop the skills needed to ensure the business thrives.
Cash Flow
Individuals find they feel more comfortable buying an existing business because it comes with a customer base. The cash flow has already been established. When evaluating a business, potential buyers need to look at certain factors.
The buyer needs to consider the asking price of the business and its fair market price. When doing so, they need to consider the financial health of the organization, its earning history, and anticipated future growth. Intangible assets need to be taken into account during this process. Is the brand name easily recognizable, and what is the company’s market position?
The existing owner should offer projected financial statements along with balance sheets, income statements, tax returns, and more. The buyer can then determine if the cash flow is expected to remain positive in the coming years. With this information, they can identify any potential issues and examine information that isn’t as tangible to determine if the business is a good purchase.
Financing
Men and women looking to start a new business may find it difficult to secure funding for their new venture. Purchasing an existing business tends to eliminate this concern. The buyer can produce profitable financials when requested by a lender to show the business has a positive track record in terms of its cash flow. Some people have the funds to purchase the business outright, but this tends to be rare.
Certain sellers offer private financing, and this is an option to be considered. Nevertheless, most buyers find they must use conventional sources to obtain funding. Positive financial statements of an existing business help in securing financing through a bank or SBA loan. Other sources of funding will likely require proof that the business is financially stable before offering the funds, but it remains easier to secure funding for an existing business than to obtain a loan for a new venture.
In fact, many entrepreneurs find the biggest obstacle to achieving the goal of owning their own business is financing. Men and women need to research all funding options to find the one that best meets their needs. Nevertheless, lenders feel more comfortable financing a business with a proven track record than a brand new organization that doesn’t have an established history of success.
Brand Recognition
Brand recognition can be a good or a bad thing when a person is considering purchasing an existing business. Individuals tend to be creatures of habit. They find a business they like and stick with it through good times and bad. They also remain with the business when it changes hands. However, if a business has earned a bad reputation, it is hard for the new owner to overcome the negative feelings of consumers. Keep this in mind when comparing opportunities to find one that has a good reputation in the marketplace.
When purchasing an existing business, ensure the sale documents include a provision that states the registered name of the business, the phone number, and the website will be transferred to the new owner. If the current owner refuses, the buyer needs to find another opportunity.
Brand recognition is one reason many entrepreneurs choose to purchase a franchise rather than start from scratch. Consumers are already familiar with the brand and its offerings. However, the same can be said about any business. If it has a solid customer base, it’s an opportunity that should be investigated.
Staff
New business owners often find it difficult to attract and secure talent, and a failure to do so can lead to the downfall of the organization. Investors who purchase an existing business find this talent is already in place. However, they must take steps to ensure key employees remain in place following the transfer of ownership. This helps to smooth the process, as customers see familiar faces when they visit the establishment. Although the ownership has changed, they know the people handling the day-to-day operations, which makes them feel more comfortable staying with the business. Once the transfer is complete, the new owner should take steps to retain these individuals.
Market Position
An existing business can expand by purchasing the competition. Doing so increases its customer base and market share. Furthermore, the sale includes any equipment and resources of the competitor. Most businesses today lack a formal succession plan, so take advantage of the opportunity to grow when it arises.
Entrepreneurs need to consider the benefits and drawbacks associated with starting a new venture or purchasing an existing business. Individuals find there are many advantages associated with purchasing an existing business that should not be overlooked. The six benefits mentioned above are only the start. Learn other advantages to determine which option is right for you.