Buying a Business is Risky! 7 Reasons to Buy One Anyway! - Orangecountybusinessbroker
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Buying a Business is Risky! 7 Reasons to Buy One Anyway!

Category: Buying a Business 

For many people the prospect of giving up their job and steady paycheck to start or buy a business is unthinkable, even terrifying.  In fact, a study sponsored by Weebly and conducted by Wakefield Research found that while most Americans think about quitting their job twice a week, one third of those surveyed fear starting a business more than jumping out of an airplane.  No doubt there is an abundance of fear about starting or buying a business, but is it worth the risk? Are those fears warranted?

7 Reasons to Start or Buy Your Own Business

  1. Control Over Your Life and Destiny plus You’re the Boss
  2. Control Over Your Income and Growth
  3. Pursue Your Passion
  4. Set Your Own Schedule
  5. Wealth creation and tax benefits
  6. Your business is an asset you can sell in the future
  7. Corporate jobs don’t last forever

What are the Risks of Starting or Buying a Business?

Starting a business is risky and  in fact most startups fail within the first few years.  SBA and Census Bureau data show that that 30% of new businesses fail in the first two years, 50% in the first five years and 66% in the first ten years.  So there is justification for the fear of starting a business, but what about buying an existing business?

Buying an existing business is entirely different.  The business has already survived the startup and embryonic phase and is likely a mature business.  The products or services are established and proven. Employees are trained and in place. Customer relationships are established.

Start Up Risks vs Buying an Established Business

Startup AdvantagesEstablished Business Advantages
1. Fulfilling-building your dream.1. Lower risk; established customer base plus products & services.
2. You get to do it your way.2. SBA or seller financing to purchase business
3. You can choose your location.3. Immediate cash flow
4. Possibly less cash upfront (but not in the long term).4. Established Businesses Survive Downturns
(see SBA data below)
5. You can start slow and ease into it.5. No startup phase, it’s up and running.
Startup RisksEstablished Business Risks
1. Unproven product-service.1. Every business, even good ones, have problems which you inherit.
2. Unknown brand, product, service.2. Problems you may miss during Due Diligence.
3. No cash flow initially and slow ramp up.3. Industry or economic downturn.
4. No bank financing available, most startups funded with credit cards and cash (see SBA data below).4. You are not capable of running the business.
5. Industry or economic downturn.
6. Expansion financing will be difficult to obtain for several years other than personal credit.
7. You are not successful in running the business.

There is less risk involved in buying a business and problems within the business can become opportunities for the new buyer.  The majority of sellers want to see a buyer of their business continue to be successful and will oftentimes be willing to stay on after the training period with a consulting fee in order to facilitate a smooth transition with both customers and employees.

How to Buy a Business

For more information about buying a business and how to buy a business see the book written by Bill Grunau, “Own Your Future, Straight Talk About How to Buy a Business and  Build Your Future”.    

In our book you will learn: Own Your Future How to Buy a Business

  • How to Work with Business Brokers
  • How to finance an acquisition with Small Business Administration financing;
  • How to use your 401K or IRA funds to buy a business without penalties or taxes;
  • How to write offers;
  • How to conduct due diligence;
  • How to develop a 100-day and first-year plan;
  • How to develop an exit strategy;
    And much more

More SBA Data and Infographics

  1. Small Business Survival Rates and Firm Age
  2. Do Economic or Industry Factors Affect Business Survival
  3. Small Business Facts – why do businesses close?
  4. Credit Card Financing and Small Business