Small Business

Starting a New Business vs. Buying a Business

Considering buying a business over starting from scratch? There are a few advantages to buying a business instead of building one, so it’s a great choice. But what are the specific advantages? How can you make the process easier? Learn the benefits in this article and discover why you should write a letter of intent to help you.

Business negotiation

Does Starting a Business From Scratch Take More Effort Than Buying One?

The simple answer is that starting a business from scratch can take more effort than buying one. Although there are some advantages to starting your own business, such as pursuing your own passion and vision and owning every detail of your business, there are several reasons to consider buying one.

What Are the Benefits of Purchasing a Business Instead of Starting From Scratch?

If you’re wondering what the main benefits of buying a business are (instead of starting from scratch), here are five reasons to buy rather than build.

1. More straightforward to get financing when buying a business

Did you know it’s much simpler to get the financing you need when buying a business than starting one? The reason it’s so simple is that lenders and investors usually consider investing in existing businesses less of a risk due to the business’s established track record. Since a startup will never have the track record of a fully established business, it’s easy to see why choosing an existing company is an easier idea.

2. Receive a pre-established customer base

When you buy a business over building one yourself, you’re more likely to end up with one that already has an established customer base. This means you’ll get constant sales and won’t have to establish complex marketing strategies to gain new customers. You can spend less money on marketing and find it easier to pay the bills.

3. Find a business model that works

By buying a business, you can opt for a company with a working business model. All that’s required is to select a well-established business, and you won’t need to worry if the business model is a success.

What’s even better is to choose a business franchise that has already been able to replicate its success in different locations. Selecting a business franchise that has a proven business model will eliminate the need for excessive hard work and potential stress.

4. Buy a business with an already-established infrastructure

Need a business that already has an established infrastructure? You’ll get one more easily by purchasing a business instead of creating one. The business you buy will already have the fixtures, equipment, technology, online presence, social channels and followers, and online reviews – all the required features of a running business.

5. Continue working with a business that has skilled employees

Opting to buy a business will ensure you already have the trained, skilled employees needed to continue the smooth operations of the company. You won’t need to hire new employees or train them. You also won’t need to teach them about the values of your business as they will already be familiar with them.

Business sales negotiation

What Are Letters of Intent, And How Are They Related to Buying a Business?

Letters of intent are legal documents that set up conditions and goals (or intentions) between upwards of two parties before they enter into a formal contract. With a letter of intent, you can demonstrate that you want to create a formal agreement, reinforce the sincerity of your intentions, use the document as a basis for future meetings, and set out your hopes for formal arrangements, such as buying a business.

When you draft and then create a letter of intent to buy a business, you can establish the main conditions for the transaction. You can reach an agreement on the conditions of the purchase with the business seller, and you can ensure the price and key terms are also acceptable to the seller.

What Should Feature in Your Letter of Intent for Business Purchasing?

Some of the key clauses to include in your letter of intent when purchasing a business include the following points:

  • Include your name, the name of the other parties, and your addresses
  • Mention whether the letter of intent is legally binding or not
  • Include the terms related to payment and payment frequency
  • Explain whether bank financing will be part of the agreement
  • Explain which state jurisdiction the letter of intent is categorized under
  • Sign and have all other parties sign the letter of intent

With these points, you can conclude your arrangement and proceed with a legally binding document to complete your transaction.

Buying a Business Versus Starting From Scratch: Critical Points to Remember

Buying a business offers plenty of advantages over starting from scratch and building a business from the ground up. Remember that a letter of intent can be a preliminary opportunity to stipulate your arrangement’s conditions and ensure you include all the critical points mentioned above. You can then buy your business and begin reaping all the benefits without the stress related to building one from scratch.


Business Asia
the authorBusiness Asia

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