Another possibility of going into business is to buy a going concern versus starting up from scratch. With an ongoing business, there is not startup. You just take over.
The advantages are you already have a customer base to start with. You will likely already have employees that are trained and know how to keep the business going. You already have vendors you’re buying from and presumably a line of credit.
The potential downside is, the business may have been badly run. The employees may not take to new management. The business may have a lot of outdated inventory. It can, to a certain extent, be like a used car.
The proper way is to negotiate hard and perform due diligence.
As an example of what can go wrong, I have a friend that does the same work I do. From time-to-time, he tries his hand at being an employee before he gets fed up and goes back into business for himself.
He just resigned his most recent foray as an employee. The company he left appears to be doing well. They have a new product that is in hot demand by their customer base. They get 50% down when the contract is signed and the other 50%, via check or wire transfer, when delivery is made.
Sales are growing quickly. But my friend tells me, the software doesn’t really work. It looks great when doing a demo, but once you get into the installation, the customers get very unhappy very quickly.
But the owner is in the process of selling the company and my friend expects the owner to make a very nice profit, from when he purchased the company just a few years ago.
If you were the prospective new owner, how would you find out this lurking time bomb? The only way would be to do a survey of the customer base.
I bring this up only to show potential pitfalls of buying an existing business. But there are many small businesses that only need a fresh infusion of new blood and enthusiasm. You could be that to this business. Employees usually want to keep their jobs. If they feel you really want to make the business run, you’ll likely have them on your side.
Like any other venture in life, just look before you leap.
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