Buying A Business vs Starting From Scratch

Want to run your own show? One of the first conundrums you'll face is whether buying a business or starting your own from scratch is the right choice.

According to the Australia Bureau of Statistics, more than 60% of small businesses cease operations entirely within their first three years of trading. One of the most common reasons that they fail is due to a lack of cash available to meet their expenses, particularly within the first six to twelve months - and these figures were issued before the arrival of the pandemic. 

If you truly want to be the boss, then it’s important to know that it’s not all glitz and glamour. Starting a business requires analytical thinking, determined organisation, and detailed record keeping if you have a hope in hell of lasting six months, let alone turning a profit. In comparison, buying a business often costs more, but is also considered to be less risky than starting your own, especially if you can buy a well-managed, profitable business for the right price. 

While there is no right or wrong choice, significant research and number crunching is required in order to determine what options best fits your own individual needs and circumstances - so what factors are involved with weighing up buying a business vs building your own from the ground up?

Buy A Business Or Build Your Own 

When properly executed, buying an existing business that is already established should in theory mean immediate cash flow. The brand in question should have a solid financial history, which can give you an idea of what to expect. In the long run, it can also make it easier to secure loans and attract investors. As a general rule, buying an existing business means that you will acquire existing customers, contacts, goodwill, suppliers, staff, plant, equipment and stock.

However, it’s important that you do the proper research before committing to purchasing an established brand, as failure to do so could result in you being stuck with a “lemon” and significant financial hardship. Keep in mind that not every business on the market is a good prospect, as many owners could be selling unprofitable or under-performing businesses. As a buyer, it’s your job to distinguish the difference prior to a purchase, and understand the risks involved. 

In comparison, starting your own brand or business from scratch is a whole different ball game. Going down this path is often cheaper when it comes to upfront costs, but you have no existing traffic or customers to rely on as a means to quickly start generating income. Whether we like it or not, starting a business involves far more than one good idea followed by millions in sales. 

All budding entrepreneurs should think of a business plan as a road map to their goals. On paper, a good business plan identifies where you currently are, where you want to be, and your plan as to how to get there. It is a “living document” that will ideally grow, change and develop right alongside your business. Without identifying your goals, how do you hope to reach them? This is where the importance of a business plan comes into play.

Although it’s certainly not one of the “fun” parts of starting a business, getting your tax and legal obligations right the first time will save you a lot of pain further down the track. This also includes getting it right from the very beginning, such as settling on a business structure, organising an ABN, and registering for any applicable business names or trademarks if required.

If you’re tossing up whether buying a business or building your own is the better path, there is a third contender to consider: franchising. At its core, buying a franchise is a way to start a business by legally using someone else’s expertise, ideas, and processes. Where implemented, a franchisor licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. While it may sound like a golden goose, franchises are designed to be marketed and sold that way, so take great caution to read the fine print when it comes to the rules and regulations attached to this type of business arrangement. 

Regardless of what format you choose to go for, being a business owner requires consistency, organisation, innovation, and a lot of hard work. However, knowing when to outsource help from an industry professional can be a gamechanger when it comes to keeping your business goals on track - but where can you find them?

Navigating The World Of Business With The Professionals 

There’s no denying that brands and businesses of all shapes, sizes and sectors have done it tough over the course of the last two years. Whether you’re starting a business, purchasing an existing one, or even reevaluating where your current one stands - all require some form of financial know-how if you hope to successfully navigate your legal requirements as well as hitting your business goals. 

However, if understanding the legalities that surround your business or finances isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant in order to free up their time while knowing that their financial obligations are already taken care of by the professionals. 

Ultimately, the team at Muro believe that every business owner is an entrepreneur. However, accounting does not discriminate - finances break down barriers and are not territorial. If you would like to take a deeper look into your finances, please get in touch with us at Muro today to ensure that you’re on the right path for success.