New Or Existing Business?
Choosing whether you should buy an existing business or start your own is a decision that needs consideration. There are obviously pros and cons for each option.
When starting a business from scratch, you are completely in control. You get to choose what you offer or sell, set up the systems and processes to go along with it and create your own brand personality. But, there is a lot of work involved in doing these things. It can also take longer for your business to start turning a profit while you get established. So, you will need to be willing to put in the hard yards and have a plan for how you will handle your finances.
If you choose to purchase an existing business, there is a greater chance that your business will succeed as it has already proven itself in the market. It will also be easier to turn a profit, with established staff, systems and client base. However, this profit may be offset by the need to borrow the funds to purchase the business. Again, you will need to be mindful of how the finances will play out there.
For either business option, it is vital that you perform due diligence.
Completing Due Diligence
There are a number of things that you will need to look at before jumping into a purchase or before embarking on a new venture. Some of these are:
Valuing the Business
You don’t want to sink more money into a business than you can get out of it. So, if you are starting your own business, you need to evaluate the amount of capital needed to get it off the ground and whether you will recover the costs later. When it comes to an existing business, you will first need to establish if it is worth buying – will it turn a profit and what is the purchase price?
Validating the Market
Is there a need for your product or service in the market? Is there a unique point of difference that you can offer or is the market already flooded with similar businesses? This is easier to establish with an existing business as you can look at the sales trends. With a new business, market research is essential to ensure your idea is viable.
What are you going to need to run this business? Will you need certain tools, machinery or specialist equipment? Do you have the skills and knowledge to operate the business yourself, and do you have the right team of people to surround you? Remember all of these things will cost your business money, so factor them into your figures.
For more information on the due diligence needed, check out the great book Starting a Business, Growing a Business.
Building Knowledge and Support
Every successful business needs a team to support it. Even if you are a sole operator, you need to surround yourself with the right people. That means all the experts that can help you to build a successful business. They can include a VA, content creators, marketing experts, a bookkeeper, seasonal workers and other help that you contract.
A vital team member is your Chartered Accountant. Not only do they look after your taxes, but they also help you to understand exactly what is happening in your finances so that you can grow your business.
Running a business can involve a steep learning curve. That is why it is important to arm yourself with all the right information and why I wrote my book Starting a Business, Growing a Business. Inside the book you will find lots of important information and insights. You will benefit from my experience in helping many clients start and grow successful businesses