Is it better to start from scratch or buy an existing business?
The question to ask is, “Is it cheaper to build or buy?” In other words, what would it cost you — in money and time — to replicate what the other business offers? When figuring this out, the easiest things to measure are tangible assets such as facilities and equipment. Next, try to value their customer list: will the customers actually stay with you, or are they likely to leave once the current owner does? Be particularly careful if the business isn’t currently profitable. Every potential business purchaser believes they can take an existing, floundering business and run it more profitably than the current owners. That’s rarely true. One advantage in buying an existing company, however, is if they have tangible assets such as a building or major machinery. The U.S. Small Business Administration has a special loan program — “504” — for the purchase of facilities and equipment. This may make it easier to finance the start of your business. For more information on the program, on the Int
