Embarking on the journey of turning a hobby into a career is a good idea and very rewarding. So, are you considering setting up a new business from scratch or buy an existing business?
Building a business from scratch can be very rewarding but there are things that make up its elements; among which are the need for a unique product or services, technology, and legal duties. The bottlenecks involved in getting a new business up and running could be very worrisome sometimes. But the truth of the matter is, there are very few “new ideas” out there that have not already been tried. A thorough evaluation and understanding of the marketplace, competition and answering the question ‘Why’ are critical to the success of any new venture.
Not having a proper track record to go with could pose serious problems when starting a business from scratch. There could be a difficulty of coming up with your own idea, building a customer base, marketing the new business and establishing cash flow. Also, obtaining financing from financial institutions and potential investors may be very difficult due to lack of track record. According to research made by Small Business Administration, only 5% of small businesses in Nigeria survived the first five years after they were launched. This implies that 8 out of 10 small business in Nigeria fails within some period of time and it is no longer news that 99% of all new business ventures fail in the first ten years. Thus, the chances of survival of a start-up business in Nigeria is low.
“There are no disasters in business that you can’t avoid if you see them coming and make the adjustments.” – Boune T. Pickens. Jr.
However, buying an existing business may be a more efficient way to business ownership. It is less risky and provides a proven track record on which other important factors leverage on; Financing a purchase is often easier also is its strategic location and established customer base. An established business has an operating process, trained employees and relationships with strategic partners. Operating an established business makes more fun and offer a better growth potential than starting a business from the scratch because you are buying the assets of the business and a proven idea. More so, the existing cash flow can provide immediate income to the buyer. Generally, the advantages of buying an existing business outweigh the disadvantages.
Experts generally agree that when you buy a business, you take a calculated risk that eliminates a lot of the pitfalls and potential for failure that come with a starting a new business. Therefore, paying the extra cost for an existing business will outweigh the risks of starting one from scratch.
Written by Olanrewaju Muili