Owning a business is something that many Australians aspire to do. It presents opportunities to manage your passion, have greater independence and earn a better income. However, there is a major decision to be made on whether to buy a business or begin one from scratch.
Buying a Business
Pros:
- Immediate cash flow.
- If buying an already existing business, you will benefit from the work that has already been done building a brand, acquiring business assets, developing business processes, and developing relationships with business customers. It is possible to take over ownership of the business and generate profit in your first month.
- You are exposed to less financial risk providing that the business is doing reasonably well, it is safe to assume that it will continue doing so.
- Easier to access financing as lenders are more likely to provide business loan financing for the purchase of an already existing business.
- Established reputation and instant market access.
Cons:
- You are stuck with the previous owners’ mistakes, debts, issues and way of doing business. You have less freedom when it comes to the changes you can make to the business.
- It can be challenging to properly determine the value of the business.
- It can be hard to determine how well a business is operating when looking from the outside in.
- Financial history is not an indicator of the future success of the business.
- The upfront cost of purchasing a business can be significant and is often the prime deterrent for many aspiring business owners.
Starting a Business from Scratch
Pros:
- You are not bound by the previous history or rules of the business.
- You are given a blank canvas to create a business that best suits your vision.
- You can create a new niche in the market.
Cons:
- It consists of a lot of work, as new businesses usually require a significant investment of time.
- It is more difficult to secure financing as banks are less likely to lend funding for a new business venture if you are not already independently wealthy.
- Most businesses usually fail within the first few years, meaning the risk of failure is considerably high.
- There may be resource constraints as some commodities are either lacking or cost dearly in the early stages of a new business.
- Building a customer base from scratch can be a slow process that requires significant marketing and sales effort.
If deciding whether you should start or buy a business, you need to work our what is important to you based on your vision. Due to the complexity of such, we recommend attaining legal advice to help you decide what best coincides with your values.
Contact us today at 03 8400 0100 or email us at admin@elaminelaw.com.au
