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Why start a business, when you could buy?

Starting a business in this economy is not the way to go. There are plenty of profitable winner businesses out there selling as we speak for far less then their really worth. Now is the time for people who want the most out of life to grasp on and take the plunge.

I think a key idea to remember when buying a business is to try and buy a winner. I know its tempting to buy a loser business and turn it around, but I don't think it's the financially sound way to operate. Purchase a mature profitable small business and you'll have cash flow right from day one.

I'd also recommend not straying out of your field of expertise. A person that has been an executive of a produce company for 15 years has no business buying a water park. Stick to what you know.

Anyone interested in the buying of a business should check out The Business Buyer Advocate blog at It is a great blog full of must have knowledge for anyone thinking about taking the plunge.

Frank Fitton

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Answers (7)
Steve Skrlac
Keystone Business Brokers Inc.
Business Brokerage Services in Ontario, Canada

Good post. As professional in the business brokerage field in Toronto, Ontario I am constantly asked by purchaser if it is better to buy a business or start one. The one metric I always point to is the incredibly high failure rate of brand new start-up operations.

Jan 19, 2011
Jon Holmquist
Edgemaster Model 400 sharpener
Marion County, OR

Frank, all of the advice you give as well as the advise from others, is great advice for any buyer as he/she is considering entering the self-employment group.

To be successful and HAPPY with your business you have to love what you are doing. I think and recommend that people carefully consider is they can be happy with what they do.
One of my franchisees was a cannery worker with very little investment money but hated his job. I put him in a van and he went out and sharpened knives. He isn't getting rich, but at 64 years old he started putting money in his pocket and working less hours doing something he loves doing. He now says that he is "unemployable" as he loves his employer and his employment and he only has to answer to himself for the amount he earns each day, week, month and year. He has earned well over $100,000 in four years with a very low investment and loves it. You can't put everyone in a basket and hang rules on the handle. Every situation is different must be approached differently. Just my opinion. Jon at Edgemaster Mobile Sharpening

Jan 11, 2011
Buy-a- Company

Buying a successful business takes much of the risk out of the endeavor. You can look at real history, not projections or proformas. I have seen countless people start up a new company, only to fold within 18 months. It is NOT as easy as it looks.

I have started at least 8 companies. Not once have I hit the pro forma income levels I projected in the business plan. And I always took great care to use conservative numbers. Business plans are helpful, but they are, in the end, just guessing.

There are so many things that can go wrong in a startup, from unforeseen expenses, lawsuits, product glitches, and on and on. And, what if you build it and they DON'T come? Happens all the time.

Unless you get a thrill out of the gamble, the smart thing to do is to find a successful company that has already moved past all the startup glitches. There are plenty available, with great track records that let you know what to expect.

Jul 7, 2010
No User Photo
The BAF Group LLC

I guess it is up to me to disagree - in part - with the general philosophy, here. Not all businesses should be purchased, as going entities. Sometimes, it is better to do a startup. And keep in mind that I am a Business Broker.

One key is to find a business that suits you and develop a Business Plan that includes costing out a startup, developing Pro Forma Financials that demonstrate how long it will take you to break even, and what kind of profits can be generated thereafter. Sometimes, if you compare your Business Plan to a similar business that is for sale, depending upon the business, it is better to buy a going business; sometimes, it is more cost effective to execute a startup. It all depends on the nature of the business, the cost of the startup relative to the price asked for the going business, the speed with which you can achieve a break even the startup, and whether you can get to a level of competitive profitability with that startup, in a reasonable time frame.

I do not believe there is any blanket statement that can be made, one way or another. There may be generalizations that can be made in a specific industry; however, whether you startup or buy is not something that should be taken for granted, until you investigate both options.

I agree with Frank that buying a turn-around is not a good idea. Unless you know the business, I would be VERY careful about taking that kind of situation on. I have sold turnarounds, and sometimes they can be home runs. Some times they can ruin the Buyer. There are some businesses that should never have been started, to begin with. Unless you are extremely experienced, it is sometimes difficult to determine which ones have promise, and which are just losers.

Jul 7, 2010
Harry & Sally Vaishnav
Angel Business Advisors
Oakland County, MI

While I agree with your suggestion on buying a successful business don't forget that you will pay a premium for that. Buying a business that is not running well has benefit in terms of buying it on the cheap and turning it around to sell for a profit.

I don't think either of these approaches are wrong. It depends on what you are capable of doing. Some people are more suited for turn around situations; while others are not.

We have written about this and other small business issues at our blog -

Jul 7, 2010
No User Photo
Biz2Credit LLC
New York County, NY


I agree with your view point. Always buy a business which has shown success in the past. Some times you see businesses falling on hard time due to issues with owners like going through divorce or family issues. Thos e are good businesses to buy as it is easy to turn around them. We at Biz2Credit ( have seen that it is easier to get financing for profitable businesses even if they are more expensive to buy than loss making businesses.

Jul 6, 2010
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Freedom Business Brokers
Orange County, CA

I absolutely agree with Frank Fitton's comments on buying a business with slight disagreement. And that is he suggests to stay within the field of expertise. may be you were in the wrong business for longtime so you got expertise only in that field. It is like that if you don't open another book you don;t know what is there inside may be some new eye opening tips are there which if you apply you get outstanding amazing results.
My mother used to say it is important what a man wears but it is equally important who wears it.If the buyer
has good traits and confidence he can turn around any business.
Here is an example. Longtime ago I bought a retail store. the seller had it for 15 years. At the time of selling he told me this location is goldmine but I never advertise so my sales are low .I took his advice and after buying did heavy advertising including putting on Tv on local channels. Immediately after that my sales skyrocketed and within a year I got my investment back in my pocket (only the key moneynot the inventory).
Another year I got my inventory investment back and during rest of the years I made decent profit.
What i mean to say I never had any expertise in selling retail but I had lot of confidence in myself and in my abilities so I turned around that business and doubled the gross as well as net sales.
now I am a broker and sell businesses.Anybody could learn a lesson from this and can turn around any
rundown business but the buyer has to pinpoint the weakness of the seller and capitalize upon it and make good use of it.

Jul 6, 2010

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