Have you been considering purchasing an existing business but not sure you should spend the money when you could start your own? It’s important to weigh many factors before you decide if it makes sense to buy or start from scratch.
For years I’ve bucked the adage “don’t re-invent the wheel” because I believe some of the most creative and inspired ideas and businesses are a result of doing it differently, putting your own spin on an existing concept. If you find an existing business that you love and that has a sound track record of profit, ask yourself the following questions:
- How could I take this idea and make it even better?
- Is this business missing a demographic that I could target with a similar model if I tweak it or add something to it?
- Do I like the service or product they offer but not the location?
- Would this concept or model work with a different product?
Here’s an example:
Last week, I spotted a unique business in the parking lot of the community swimming pool. A young man was making crepes on the back of a cool little teardrop-shaped trailer. Of course, I had to interrogate him as I always do when I discover a business I haven’t seen before. I learned that he sets up every Thursday in the summer at this location and at a different location every day of the week. He takes his portable creperie to local soccer games and other community events.
As I continued my walk, I thought of other items this concept could be applied to and taken to various locations where the ideal customers gather. The list of products someone could peddle this way is endless: candy, ice cream and even non-food products. OR, what if you loved the idea of starting a crepes business but not moving a trailer to a different location every day? Could you set up on a college campus permanently?
If you spotted this business on vacation and loved the idea, you might consider duplicating in your own community. Do you know enough or could you research and learn about it to start up on your own or would it make sense to approach the entrepreneur who’s already doing this about hiring him as a consultant to help you start your own traveling crepe cart? Or purchase recipes from him?
While I generally encourage people to start their own business, there are times when it makes sense to purchase an existing business.
Years ago, my partner and I sold our home furnishings business to our controller. Since he had all the inside information about vendors, advertising, employees and the systems of the business, he probably could have started from scratch, particularly since that business was not dependent on repeat customers. He chose instead to purchase the existing business because we had ideal locations and all the suppliers, vendors and personnel in place, saving him a lot of time which meant he could immediately begin earning.
If you’re considering starting a personal service business, it might be best to start from scratch. When I decided to discontinue bodywork, it would have been foolish for another therapist to purchase the practice because I WAS the business. My clients liked my style and may have been unhappy with the work of another therapist. The same would hold true for some other very personal services like hairstylist or aesthetician. It is possible to profit from your knowledge, however, when you are ready to close a business that isn’t really salable and I’ll address that in a future post.
So, when does it make sense to buy rather than start up on your own?
The couple who purchased my contemporary craft gallery made a wise choice to buy rather than start from scratch because I had a favorable lease on a building in an ideal location which was a valuable asset in that community. I had also established strong relationships and exclusive agreements with artist and vendors. I’d already figured out what works and doesn’t so they benefited from my early mistakes which saved them a lot of money. The gallery had a loyal following with locals and was a destination for tourists. All of those factors made it a wise choice for this couple to purchase rather than start a business on their own.
If you’re not sure whether to purchase an existing business or start your own, ask yourself these questions about any business you are considering.
- Does it have an established loyal following or clientele?
- Is the location ideal or would you be able to start-up in a better spot?
- Are there a number of years left on the existing lease and is it transferable to a new owner?
- Does the seller have exclusive agreements with vendors or sources?
- How much time would it take before you would be able to generate income if you started up on your own?
- Does the existing business have a strong reputation in the community?
- Does the market warrant another like business?
What if you spot a business you love but want to open your own in a different location? I’ll address that in a future post.Lets Connect