Advertorial: Start-up, or Buy a Small Business?

on August 23 | in BUSINESSWISE | by admin | with No Comments

Depending on the financial stability of the entrepreneur, the question of buying a business compared with starting up must be given careful consideration, writes Dereck Roos, CEO of South African business services provider BizShift.

Often, because of the lack of capital the entrepreneur has no alternative than to start up a business. However, if money is available, buying a small business can give you a good head start, especially regarding the advantages of obtaining a sound client base and a good cash flow (provided that the business has been valued with the assistance of professional advisers, and the purchase price is fair and reasonable).

Similarities – As an owner you are the boss, and the risks are with you.

In favour of start-ups

It is cheaper to start up than to buy. You start with a clean sheet, and have more freedom of choice on defining the scope of the business compared with having to accept the business you are buying as is. You have the pleasure of establishing new ventures, supporting your entrepreneurial spirit, and creating the type of physical facilities you prefer. You are able to recruit employees whom you want, compared with inheriting them. Less finance is required. The initial capital outlay will be far less than the cost of buying a business.

Against start-ups

There is no initial market share – it takes time to penetrate the target market. It also takes time to raise the necessary finances, initial losses could often be for six months before profits are made, which would include the cost of equipment, hiring staff etc. There is no guaranteed salary. Not knowing the business you wish to enter can also lead to disaster.

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