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Weighing Your Options: Buying vs. Starting a Business

By August 18, 2017 No Comments

So you’ve been in Corporate America too long; you can no longer stomach the grind, the stress, and the hours.  You’ve been padding your corporation’s pocket, yet your pockets are seemingly empty.  Something has to change.  You realize that changing companies might provide a different view, but what you really yearn for is a whole new landscape, the ability to create and mold your environment to your own advantage.  And you want to feel duly compensated for the brainstorms, the headaches, and the emotional wear and tear. What are you waiting for? You have the skills, why not start your own business?

Ships in the Harbor

If only making the decision was as easy as quitting today and being in business tomorrow.  Still, there are basic steps that can be taken to turn your dreams into reality. What most individuals fail to envision is the multitude of opportunities just waiting for them.  The proverbial “ship in the harbor” is accompanied by dozens of other ships.  The question is which one is right for you, and are you willing to swim out to it?

The metaphorical ships in the harbor are business opportunities.  They may disguise themselves as Sub-S Corporations, Limited Liability Companies, or even Joe’s Bar and Grill, but they are waiting for you to take the helm.  The certainty that those opportunities are out there is evidenced by the businesses already in operation and the impressive amount of startup enterprises, particularly in the area of franchised businesses.  The Utah State Department of Economic Development estimates there are 70,000 businesses with employees in the state.  That figure nearly doubles when counting sole proprietor businesses, home office enterprises and companies using personnel agencies.  Every year an additional 2,000 to 3,000 new businesses are formed in Utah.

State Your Objective

Every successful entrepreneur I know has a reason for being in business and they focus on that reason or objective.  They usually have a war story to go with their reasoning, compelling motives for why they felt they could provide a better product or service than the existing competition.  Some even created a new paradigm or a variation of theme.  Others felt they could compete because of superior workmanship or pricing.  Regardless the reason, I have found those individuals successful because they jumped in the harbor having “preselected” their ship.

Ask the Right Questions

In the struggle to determine whether you should purchase an existing company or attempt a startup, begin with the most critical question first: What single factor should influence my decision the most?  Sure, that question sounds too simple, but odds are your answer won’t be so simple.  Most entrepreneurs become so entrenched in calculating ROI (return on investment), or how to run their previous employer into the ground, that they lose track of what is really most important to them.  For example, if immediate cash flow is imperative to your very existence, regardless the size of your investment, you should think about an existing business generating positive earnings.  On the flip side, business startups are the antithesis of positive cash flow, draining every ounce of capital they can find.  If, however, you choose to slowly transition from your current employment, or you lack the required capital to purchase a business, a startup is ideal.

Be Honest with Yourself

Both buying an existing business and starting up a new one can be time-consuming, frustrating, and even expensive.  Before you embark, consider the mirror test.  Stand in front of a mirror and ask yourself the following question: “Am I really cut out to run a business?”  Certainly not every personality or background is.  There are many hats that must be worn and responsibilities are multi-dimensional.  Your next question should be: “Am I really committed to this endeavor?”  Am I committed financially, committed mentally, and do I have the physical stamina to endure all the storms that I will have to weather?  Be prepared for a shock to the financial, physical and mental nervous system like you’ve never experienced before.  Answering tough questions today will make the journey ahead smoother, more productive, and much more enjoyable.

Find Your Niche

The secret to business ownership success isn’t written in Hebrew. It’s good old-fashioned English: Find a niche and exploit it.  Remember, return on investment is a key ingredient in analyzing the purchase versus startup decision, but determining which factor is most important to you is paramount.  Though there may be dozens of attractive ships in the harbor, only you can determine which ship you are fit to sail and the destination to which it will take you.

~Bradley G. Marlor is a partner and Certified Business Intermediary at Utah Business Consultants, a full-service Business Brokerage and Valuation Firm.