So, you want to be a business owner? Owning your own business comes with a lot of perks — and could be something you can pass on to future generations — but it’s also a big responsibility. As many current business owners reach retirement age, the option to purchase an existing business is becoming more and more attractive. Rather than reinventing the wheel, you would be getting a built-in customer base, cash flow and location. But if you’d rather start fresh, there are some things you should know.
Let’s weigh the two options to discover what’s right for you.
According to the U.S. Small Business Administration, the largest advantage of buying a business is having “an existing blueprint that can include important factors like an established customer base, defined operating expenses, and fully trained employees.”
A franchise is another option that comes with brand recognition and marketing. This is common for restaurants, hotels and service-oriented businesses. While you’re getting a logo and customer-tested products right off the bat, you also have to follow some rules from the franchise about how to run the operation.
Purchasing an existing business or franchise is certainly less risky than starting from the ground up. But maybe you have a unique idea that you want to introduce to the market. You’ll probably spend less starting up your own business, but it may be harder to get financing.
If you decide to go the startup route, the SBA suggests conducting market research to find a competitive advantage, writing a business plan, choosing a legal structure, applying for licenses and permits and opening a business bank account.
There’s certainly more planning that goes into starting a business as opposed to buying one. Funding is a big part of the puzzle. Figuring out how much money you’ll need can help determine how and where to get it. From self-funding to venture capital, small business loans and even crowdfunding, the options are almost endless.
Business owners wear many hats, but in the beginning, research, research, research is the key to being successful. Doing your due diligence will pay off in the end from both a financial and overall operations perspective.
Here are 3 more tips from the SBA to help you decide:
1. Quantify your investment
Review your finances and decide how much you’re willing to spend to purchase or start a business. This will help you determine what type of businesses or brands are best for your budget.
2. Consider your talents and lifestyle
Be honest about your skills and experience, as they can help you eliminate unrealistic business ventures. For example, if you prefer hands-on assistance, then franchising might be best for you. On the contrary, if you’re an experienced business owner, you may want to consider buying an existing business.
3. Review the full landscape
Look at the current business landscape and, if purchasing a business, don’t be afraid to ask questions about contracts, leases, existing cash flow and inventory. The more you know, the better equipped you’ll be to make a sound decision.
MidSouth Bank offers a full line of business banking services that include checking and savings accounts, business loans, cash management tools and even equipment leasing and insurance premium financing. Learn more.