Starting and sustaining a business is no mean feat. Many businesses, however, fail to go past the start up stage due to either poor performance of management.
And with the Kenyan economy becoming more competitive and challenging to entrepreneurs, most investors are now opting to buy already existing ventures. Such businesses have more advantages compared to starting from scratch.
When the pandemic hit the country in 2020, most businesses were affected with owners seeking to off load them once a good offer presented itself.
Investopedia, one of the world’s leading financial sites, educates investors on the alternative option of owning a business.
Kenyans.co.ke tells you why buying an existing business is a better option than starting from scratch.
Easy to equity finance
When it comes to seeking equity financing, investors are likely to put money in a business that has updated books and shows promising market returns.
Also, family and friends with different business skill sets are more likely to invest in an existing business in comparison to building a company from scratch because of its speculated market growth.
Established market
Some businesses incur huge costs when it comes to getting a market for their goods and services. Existing businesses offer a ready market hence allowing the owner to increase the market share through competitive or comparative advantage.
The dependence of the consumers on the existing business will give the owner a sense of direction when applying business models.
Existing suppliers
Acquired businesses enjoy the benefit of inheriting suppliers, equipment, stocks, and customers. Individuals who start a business from scratch struggle to create a stable supply chain when delivering goods and services.
It is advisable to retain competent employees to cut labor costs incurred on recruitment and training.
Limited risks and certainty
Existing businesses offer limited risks in comparison to starting a business from scratch. The market risks and operating risks are the core considerations by new business owners.
The due diligence of an individual will identify all the risks and invest in the business operations that have contributed to account deficits.
Ready licenses and certificates
Individuals who start a business from scratch face hurdles in maneuvering through the licensing and acquisition of certificates. The duration will vary depending on the policies and regulations applied to different businesses. For example, industries have to satisfy environmental regulations before commencing operations.
The acquisition of running a business reduces the burden of waiting for licenses. The new owner should research the tax system, legal procedures, and local regulations to avoid business operations being halted due to compliance issues.
Ongoing cash flow
Most existing businesses have ongoing cash flows. For an acquired business, low-profit margins are positive, the direction of profit margins can be changed through effective business strategies and models.
Operational advantage
When an individual acquires an existing business, the new owner buys himself time. The acquired business can be operational within a short time in comparison to the individual who would have started from scratch.
A business owner will benefit from the legal and physical infrastructure already in place. It is also wise to listen to experienced employees that the new owner has acquired. They might offer alternative ways to efficiently run the day-to-day business operations.
