With Houston showing such phenomenal growth over the last few years more and more people are interested in owning a business of their own. The question is, do you create a new business or do you buy an existing business?
It’s in fact much better to buy an existing business than it is to start one from scratch. Why?
1. Lower Equipment Costs
Buying an existing business will mean you get all the equipment cheaper than you would have if you had to buy it new.
2. Little to no build-out cost.
When you start a new business, the retail space you’re going to lease will require “build-out” – this is the term used for the money you have to spend to get the space looking the way it has to look for your particular business. This can run to many thousands of dollars. Sometimes the landlord will contribute towards that cost but often their contribution does not cover all the cost. Either way, you pay for it in cash or in the rent. When you buy an existing business, the space will already be built out probably just the way it needs to be. You might make some modifications but those will not cost nearly as much as building out the complete space from scratch.
3. No down time.
If you have to create a business from scratch, the first few months of effort are all “investment” effort… i.e. your business is not open yet as you’re completing build-out and hiring and training staff and gearing up for the marketing. During that time you are not earning any money from the business. If you buy an existing business, you are operational from the day you close the deal. No down time at all!
4. An existing client base.
When you put together a new business you have to do a lot of marketing to get people to notice you. Those campaigns can be expensive. When you buy an existing business it should already have a client base… it might not be the biggest and best client base but at least you have some volume that you can work with. You could quickly educate your existing client base on the new benefits that you bring to the table… you have someone to talk to!
5. Great Locations
The best locations are usually already taken for the new business you want to start. So, you are forced to look at secondary locations. However, if you buy an existing business you can often find one available for purchase in a great location.
There are more reasons why it’s a good idea to buy existing as to creating a new business from scratch… another is that you have employees already trained to work with. You might have to change a few but it’s much better to have some to start with than to have to start from zero. I know of a restaurant chain in The Woodlands that actually expand only when they can purchase another restaurant that’s going out of business. They then convert it to their format & bingo, they’re up and running in a new location.
If you’re thinking of buying a business, give us a call. My partner, David Matos, a CPA, and I have formed a business brokerage to complement our work in the retail commercial area. David is a qualified CPA and completes the business valuations. I, with my commercial real estate expertise, review the real estate owned or leased and together we form a formidable consulting team to help you find the right business opportunity.
Lance Langenhoven, CCIM