Start and Business or Buy a Business?
The 3 thing you need to know.
Some people have the need to birth their own business. They want something that they say is their own, that they built from the ground up. At the same time there are others that just want to start making money for day one. Neither one of these paths are the wrong one but let’s take a look at both of them so that we know what we are getting into and that we are sure it is what we really want.
To Start a Business:
Start up Cost: When starting you own business from the ground up we have to first have a plan. What do we want to do, who is our customers, and what will we give our customer that will benefit their life. This is included in startup cost because it does cost you a lot of time and research to set these goals correctly. You really don’t want to through something together quickly and say “Well there is my plan”. If you don’t plan wisely, you plan to fail.
The next part of startup cost is your budget. This is very important because if you don’t have a good idea of the cost it will take to get you generating an income it can become a stumbling block to your success.
Some businesses like consulting can be a low cost to get started with a great return. These are several service businesses like accounting, personal or health coach, internet security, real estate, and mortgage broker just to mention a few. The cost of startup is a lot lower and can be started part time I most cases.
Other business such as retail, manufacturing, and automotive shops as an example have a much higher startup costs. These often require equipment, fixtures and inventory. In addition there will be a time of building customers before a positive income is established. If you have investment capital these kind of business give you more flexibility than service business.
To Buy a Business:
A Third and Better Option is to buy a business that is already up and running with a positive cash flow. This is not as difficult as you may think. There are many businesses for sale right now that are a good investment. The owner wants to retire, health reasons or they have other interest that makes a better return on their investment. There are about as many reasons as there are business to buy. But, be causes. If you don’t know how to play in this area it can be very tricky. You have to know what to look out for, how to analyze the accounting, how to tell if the business has a growth or is going downhill, and much more. As they say, the greater the risk the higher the reward.
As a certified business valuation and business consultant I have seen many great deals go for pennies on the dollar but I have seen people invest way too much and lose their investment. The real answer to all of this is Knowledge. If you take the time and energy to learn what you are doing it is hard to lose in business. That is what Warren Buffet has done his whole life but he never bought anything without thoroughly researching it and he always had the upper hand because it did his research.
In closing my two favorites, depending on where you are in live is
- Starting a service business like consulting
- Buy a business that is already making a positive cash flow for day one.
I will have much more of these in future newsletters. We will pick different industries, different business, and dig into them and find the good and the ugly about them. It will be fun with lots of interesting stories and idea.