Buy an Existing Business Instead of Starting One

Starting a home or small business from scratch is often an iffy and expensive process.  Legal issues, licensing, permits, location, building a customer base – to name a few – are time-consuming without promise of success.  Even with great planning and research, the break-even point could be some years away.  Profits are sometimes slow to develop, but expenses add up quickly!

There are other options for would-be entrepreneurs: buying an existing franchise or business.  Baby-boomer retirements are creating many opportunities to buy an established business.  Minimal up-front capital options are possible too: sweat equity for the existing owner, deferred payments, rollover from an IRA, small business funding, grants or some combination.

Purchasing a current concern has advantages and some drawbacks also.  We’ll step back from the ‘yeah – that’s it!‘ moment to consider some issues.

Why to Consider a Purchase

Ideas – you suffer from a lack of solid business ideas for a geographic area, level of expertise or interest

Age – when laid off after a certain point, ageism exists.  Period.  Consulting may be an option, but you are not likely to be a new hire at 60.

Opportunity – that little corner cafe you’ve always loved is up for sale and makes great muffins …

Income – retirement income may not be enough.  Do you need to supplement?  A business income may be appropriate.

Considerations

Money – when starting any business, some amount of money is needed.  Reserve funds are important to have in case of emergencies.  Upfront capital may be necessary too.

Tax advantages – part of a purchase may be financed with ROBS or Rollover as Business Start-up.  This takes money from a 401k plan and invests it in a new venture.  The regular early withdrawal penalty doesn’t apply in these cases (check with a qualified professional to confirm).

Paperwork and due diligence – ensure you are getting the best deal by working with a broker and carefully researching the market, the customers, the vendors, and the legal options. 

With the global economy still in low gear, the business market is in favor of buyers more than not.  Are you interested?  Here are some good resources to start with:

International Business Brokers Association or ibba.org

BizBuySell.com

Business-Broker.net

By Dion D Shaw

Dion D Shaw is the founder and owner of Homepreneurs

Homepreneurs.  New day.  New Opportunity.

Disclaimer

Homepreneurs does not endorse nor have any relationships with any of the services listed.  Homepreneurs receives no compensation or consideration for its suggestions.  Homepreneurs strongly urges all interested parties to conduct research and accepts no responsibility for any losses incurred.

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