Vested Business Brokers

Buying a Profitable Business for Sale vs. Starting a New Business – Which is better?

My name is Nathan Goldstein and I’m the CEO of Vested Business Brokers located in Smithtown, New York. Our business is all about helping people buy and sell profitable, privately owned companies.

Being in the kind of business we’re in we get some great questions from entrepreneurs and potential business buyers. One typical question is, “How do I go about buying a profitable small business?”
My answer  is, first you want to look at why you would buy a profitable business compared to starting a business. The private equity industry has been around for hundreds of years and it is very hard to start a business that you know is going to be a success. People always say that businesses fail within the first five years and you are lucky if you get over that five year hurdle.  You know what?…I agree with them.

When you are buying a profitable, privately held business, the reasons that you are going to buy the business and not invest the money to start the business are twofold:

1. You know right off the bat that you have a great location. How do you know that? Because that location you have is generating revenue.
2. You have a sales staff or a business process that is in place and is successful. How do you know that? Because you have a tax return that shows that or the seller has the ability to prove to you what revenue comes from that location.

First, let’s talk about location… When you buy  business you have established a great location and you have a great lease. The lease is out there for many years and that lease is going to be assumed. Sometimes you could structure a brand new lease when you are buying your business.
You mitigate a tremendous amount of your risk if you wanted to buy a business compared to start a business. We have analyzed over 12 thousand companies since we started Vested Business Brokers and I can clearly tell you that there are four corners in ever location. The south side of the street didn’t do as much business as the north side of the street and you are not going to pay the same amount of money. Unfortunately if you are the guy that started your business on the south side of the street, you are not going to be as successful as the guy on the north side of the street. You would want to be on the north side.

Buying a business gives you the opportunity to know exactly what you are buying, to analyze it, get off running, and have the success. Ready-made profits, right away. You close on Friday and on Monday morning you come in, your staff is in place, they tell you “Good morning and Good luck”, and you start shaking the customer’s hands.

There are simply more risks to starting your own business as opposed to buying one with an existing profitable track record. As an example, I recently went into a new franchise, it was at nine o’clock in the morning and I wanted to buy a cup of coffee and a bagel. I asked the person behind the counter, “How is the action? Have you been busy?” She said, “You are the fourth customer for the day”. I’ve got to tell you…I was a little taken back and my heart was breaking for this gal who spent a million dollars to build out this location without knowing what the outcome would be.

At Vested Business Brokers we could have provided this business owner with probably a million dollars worth of income or close to it…buying the business for two million with a million dollars down. That business would have had a track record, the employees and more importantly, the customers. The owner would have known the customers from day one.

Here’s our #1 business tip: buy a business instead of starting one.  Why?  Because when you buy a business there are fewer unknowns because you have the ability to research and know what the company is doing, how much money they are making, etc.

It is a great thing to buy a business, we have helped over a thousand people buy them, and if we could help you it would be our pleasure.

Visit Vested Business Brokers at http://www.vestedbb.com.