Today’s small business owners face a challenging business landscape characterized by economic uncertainty and rapidly shifting political dynamics. Yet, despite these obstacles, new business owners are successfully paving their way to success by starting a new franchise, acquiring an existing business, or launching a venture from scratch.
According to a Guidant Financial study, 33% of small business owners purchased an existing independent business, capitalizing on an established business model and an existing customer base. In contrast, a smaller proportion of small business owners (21%) chose to start their own business from scratch, marking a 23% decline from last year’s study.
As inflation continues to drive up the costs of goods and services, starting a new business in 2023 will be significantly more expensive than in previous years. However, buying an existing business (also called acquisition entrepreneurship) will help curb these initial expenses — and Viking Mergers & Acquisitions is here to help.
5 Advantages of Acquisition Entrepreneurship
1. Investment
It’s true that buying an existing business almost always requires more capital upfront than starting your own. However, financing is easier to secure for acquiring a business than starting one because lenders and investors like to see a proven track record.
2. Cash Flow
Cash flow: existing businesses (worth buying) have it; startups do not. So, although starting a new business requires less upfront capital than buying an existing business, the startup requires that upfront investment with no initial return. A startup entrepreneur must consider how long they can continue to fund the business (while supporting themselves) until it becomes profitable. Acquisition entrepreneurs who buy a business with existing cash flow can focus on growing the business and making it more profitable (rather than trying to become profitable).
3. Reputation
Acquiring a business with brand recognition, a solid reputation, and an existing client base is an exciting advantage. With credibility already established, acquisition entrepreneurs have a solid foundation on which to build and grow. Often, the acquisition includes the opportunity to carry forward a legacy of entrepreneurship started years before.
4. Structure
Acquisition entrepreneurship offers the advantage of existing staff and structure that you can step into and build upon. However, this advantage is not guaranteed. This benefit, more than any other, requires that you do your homework to ensure that you and the company are the right fit for each other. A transition period always comes with changes in ownership, and how smooth the transition goes largely depends on whether you put in the time to identify the right company for you.
5. Margin
Anyone can tell you that getting (and keeping) a startup off the ground requires a single-mindedness that puts the business before everything else. The pressures on startup entrepreneurs take a toll. And that’s the kind of pressure some folks thrive under. However, some folks are interested in owning, running, and growing a business with a bit of margin for their life and family. That’s the advantage of acquisition entrepreneurship. Take a moment to read this acquisition entrepreneurship success story to see what it looked like for Ken’s family.
If you think acquisition entrepreneurship might be a good fit for you, one of the best things you can do is involve a professional business broker. Viking can help you identify the business and seller that are the right fit for you. We’re here to help – contact us today.