Buy a company Or Start a company - Thoughts From a company Broker

Asset - Buy a company Or Start a company - Thoughts From a company Broker

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Frequently, habitancy ask me should they start a firm from scratch or should they buy an existing business. I have owned four businesses over my career. I started my first firm in my twenties and was able to grow it to eight million in earnings with over 50 employees. My partner and I were the original franchisees for Garagetek in the greater Chicago area which was roughly the equivalent of a start up. We also purchased a dormant direct mail franchise in New York City, built it up and sold it. For the past six years I have been working as a firm broker at Ajr firm Advisors which I also founded.

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Asset

As a firm broker I make my living selling existing businesses with obvious cash flows. I do not get involved in start ups or sell new firm offerings. Although some of my businesses that I started from scratch were very successful I have very strong feelings on the subject.

Though I will be accused of being biased, I commonly advise that habitancy buy a firm rather than start one from scratch. The only time I advise beginning a new firm is if you have a very unique idea for a firm which doesn't exist. I also will advise you that you need to be well capitalized because many great new businesses have failed due to inadequate finances. There are some other rare occasions where I would give person the green light on a start up.

The main fancy I advise purchasing an existing firm is to minimize the risk one takes. When person wants to be in firm for themselves they are taking a mountainous risk. It is well known that so many small businesses fail within the first five years. By purchasing an existing firm you are reducing the risks you are taking with your capital for the following reasons:

* An existing firm has a proven track record.

* An existing firm has customers.

* An existing firm already has employees.

* An existing firm has relationships with vendors.

* When you buy a firm you acquire the hard assets which contain furniture, fixtures, and equipment. Because they are part of the buy price they are commonly being acquired at a mountainous reduction over buying new.

* In most transactions the seller will furnish training while a negotiated transition period so you're not beginning from quadrate one.

Some experts will advise you to buy into a franchise if you want to be your own boss. This too is a way of minimizing risk because the failure rate of franchisees is commonly lower than independent start ups. I would agree with this, but I would take it one step further. Buy a franchise "resale" instead because you will have all of the advantages previously outlined and the ongoing training and hold of the franchisor.

Please note that buying a firm is surely not a walk in the park. One must achieve careful due diligence to make sure everything that is being advertised is accurate. Financial records have to be examined and verified. One must make sure that they look at all internal and external factors such as employees, competition, industry changes, etc. I always advise firm buyers not to buy a firm unless they feel they can heighten upon it. Very few businesses can stay on cruise control. If you are not growing the firm it will most likely decline.

It is all about risk and minimizing that risk. The goal of a firm owner is to grow and prosper. Unless you have an idea and capital for the next Amazon or Google, buying a firm will give you a good benefit over most that start from scratch.

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