{"id":11704,"date":"2019-07-18T13:16:47","date_gmt":"2019-07-18T12:16:47","guid":{"rendered":"https:\/\/entrepreneursgateway.com\/clone-everything-you-need-to-know-about-jonathan-jays-the-dealmakers-academy\/"},"modified":"2019-09-22T12:14:14","modified_gmt":"2019-09-22T11:14:14","slug":"7-reasons-why-you-should-buy-an-existing-business","status":"publish","type":"post","link":"https:\/\/entrepreneursgateway.com\/7-reasons-why-you-should-buy-an-existing-business\/","title":{"rendered":"7 Reasons Why You Should Buy An Existing Business"},"content":{"rendered":"\t\t
As an aspiring entrepreneur, you may have asked yourself the question: \u201cShould I buy a business or start my own?\u201d<\/p>
It\u2019s a great question. But is there a right or wrong answer?<\/p>
In reality, there are pros and cons on both sides.<\/p>
You may have a business idea that you\u2019re passionate about. You may have an idea that could potentially disrupt an industry or delier a new innovation to market.<\/p>
Perhaps you simply want to handle every aspect of your business your<\/em> way, rather than leading a team that already has an in-built culture and dynamic.<\/p> If that\u2019s you, then starting your own business is probably the way to go.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t If you\u2019ve read the book \u2018The E-Myth\u2019 by Michael Gerber, you\u2019ll know that 40 percent of new businesses fail in the first year. And that a staggering 80 percent fail within five years.<\/p> And here\u2019s something else to consider\u2026<\/p> One side of the fence isn\u2019t any less entrepreneurial than the other.<\/p> Yes, there are many start-up success stories that demonstrate the disruption and innovation that is often associated with entrepreneurialism. Uber and Airbnb are just two names that tick this particular box. But Howard Schultz and Ray Kroc \u2013 super successful businessmen in their own right, didn\u2019t build their Starbucks and McDonalds empires from scratch \u2013 preferring to acquire and grow already established businesses.<\/p> But all things considered, here at Entrepreneurs Gateway, we lean more heavily towards buying an already established business. And we\u2019re going to give you seven solid reasons why we feel that way.<\/p> <\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Let\u2019s get straight into reason number one\u2026<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t Unless you\u2019re fortunate enough to have the next unicorn (such as an Uber) ready for launch, it\u2019s far easier to obtain finance for the purchase of an existing business. Even if you yourself don\u2019t necessarily have previous M&A experience.<\/p> That said \u2013 notice we said \u201ceasier\u201d and not \u201ceasy\u201d. If you\u2019re looking for your first acquisition, you should be prepared to jump through a few hoops and prove to whoever you\u2019re approaching for funding that you\u2019re worthy of their investment.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t But lenders are far more likely to provide funding for an established company with a track record and a trading history. There is a proven concept, processes, systems and customers already in place. All of this supports your case for investment.<\/p> However, a start-up \u2013 even with a solid business plan and projected financials, is deemed much more of a risk. There is no track record, no trading history and no customers in place.<\/p> It\u2019s not impossible, of course, but it is far more challenging.<\/p> Which leads us nicely onto number two\u2026<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t When you acquire an existing business, you\u2019re also acquiring a brand. And in many ways, this can add value to the business that isn\u2019t already sitting on the balance sheet.<\/p> A recognisable brand not only provides confidence, reassurance and a track record, it may also include copyright and trademarks. Additionally, you may also enjoy the benefits of an established website that\u2019s already generating leads and enquiries.<\/span><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Assuming the previous owner operated the business in the right way, you have a reputation in the marketplace and in the community. This will likely mean you\u2019ll receive leads by recommendation and word of mouth.<\/p> Also, when it comes to attracting new customers through sales and marketing activities, you\u2019ll potentially have hundreds or thousands of testimonials to back up your story.<\/p> <\/span><\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t When you make an acquisition, you\u2019ll also have the benefit of inheriting a fully-trained and experienced workforce. This is one of the most valuable and important assets a business has.<\/p> Think about it\u2026 it takes time, money and effort to find, recruit and train employees. Then there\u2019s the often-overlooked aspects of staff development and assimilating them into the company\u2019s culture.<\/p> Having an existing team in place \u2013 particularly one that already engrained in the ways of the company \u2013 comes with other advantages too.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t It makes developing and implementing growth strategies far easier. Plus, it also allows you to work on<\/em> the business rather than in<\/em> the business, freeing up more of your time. This enables you to focus on the areas where you can add value, as well as go after more acquisitions.<\/p> You will also have the opportunity to take a vacation or spend more time with family. Whereas when you\u2019re a start-up owner, you often don\u2019t have this luxury.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t When you take over a running business, you\u2019ll also have a number of suppliers, solutions providers, contractors and other contacts on your books.<\/p> Over time, you may decide to switch to those that you <\/em>prefer to work with. However, it does save you time and money in the beginning, when your time is going to be short whilst you familiarise yourself with all aspects of the operation.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t But here\u2019s the real kicker:<\/p> <\/p> Do not\u2026 and I repeat do not underestimate the value of having already established suppliers and credit terms. You won\u2019t be paying pro-forma, as you\u2019ll have existing arrangements for 21-day, 30-day, 60-day or more, when it comes to payment terms.<\/p> <\/p> This alone can profoundly and positively affect your cashflow. Engineering appropriate payments terms \u2013 both for money coming in and cash going out \u2013 is something that should not be underestimated.<\/p> And with a solid supply chain already in place, you\u2019re able to avoid the kinds of operational disruptions that can hinder and damage customer relationships. It also saves considerable time and effort in establishing these relationships from scratch.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t The lifeblood of a business is it\u2019s cashflow\u2026 and what do you need to produce cashflow? Paying customers.<\/p> Winning new customers is hard enough when you have an existing business \u2013 and so imagine how much more difficult it is for a start-up. And so, having access to new customers via an acquisition is like hitting the ground running.<\/p> But, a word of caution\u2026<\/p> Always be mindful of how much of the relationship between customer and company relies on the outgoing business owner.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t This is often more prominent in smaller companies \u2013 ones where the owner plays a very<\/u> active role in customer acquisition, relations or account management. Therefore, you need to be sure that when the previous owner has gone, that many of the company\u2019s customers don not follow suit.<\/p> If they don\u2019t, then you may have a potential goldmine at your fingertips. Often, a business owner who\u2019s selling may have grown tired of the business and won\u2019t have utilised its customer base to the maximum.<\/p> This gives you the opportunity to consider what additional products and services you could sell to these clients.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/span>1<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
<\/span>Finance <\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
<\/span>2<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
<\/span>Brand<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
<\/span>3<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
<\/span>Staff <\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
<\/span>4<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
<\/span>Contacts <\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
<\/span>5<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
<\/span>Customers<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t