“You don’t have to reinvent the wheel, just attach it to a new wagon”
- Mark McCormack
More often than not, the best way to make your money work hard and putting your business acumen to use is by taking up a business opportunity. If you are looking to take the plunge into a business opportunity in India, a common dilemma you might face is — should you start a new business from scratch, or buy / invest in a new business? By and large, it is advisable that either you buy an existing business or invest in an established business. Here’s why:
Set-up Time and Expenses: Setting up a business for the first time can be confusing, expensive and difficult. You will have to work out the best ownership structure for your business (proprietorship, partnership, private limited, LLP), apply for incorporation and registration, incur preliminary expenses for business auxiliary services (set-up, applications, registrations, compliance, incorporation), invest a minimum capital, and choose a suitable location.
You can avoid the hassle by buying or investing in a business that suits your requirements. This way, from the very first day you will be utilizing your resources and energy towards adding value in a domain of your choice.
Capital Requirement: Many new businesses require substantial infusion of capital early on to keep it up and running. By buying an existing business that has crossed that stage, you can start running an established business with minimum investment.
This is crucial as businesses often slip into the proverbial ‘valley of death’ when capital dries up. When you go for an existing business, you are building upon the capital that is already invested and tested in the business. Also, the very fact that an existing business usually has some capital already made available to it means that investments in the form of debt and / or equity are likely to become easier.
Access to Resources: New business owners are likely to struggle with sourcing critical resources for the business such as a competent team, land and building, plant and machinery, technology, intellectual property, etc. When you buy / invest in an existing business, you save yourself from all the hard ground-work.
It is not just the business’s internal resources, however. It is important to account for the fact that in most cases you are also going to receive a loyal customer base, inherent relationships with channel members, distribution network, goodwill and reputation. When you buy an existing business, these resources come to you packaged as a bundle, which otherwise would take you years to build and create.
Risk Mitigation: Newly set-up businesses also have a high mortality rate due to market risks, business risks, capital crunch, liquidity crunch and labour crunch. By buying / investing in a new business, you can mitigate the risks associated with early-stage businesses.
Remember that you are also getting the golden opportunity to learn from somebody else’s mistakes and to capitalize on their learning curve with the business. This means that you will have at least a threshold to step upon and make your entrepreneurial ride smoother.
Thus, to make the best of a business opportunity, buying / investing in an existing business is often the safest and the most lucrative option. This article has been brought to you by IndiaBizForSale, the most preferred network to buy, sell, fund and grow businesses in India. If you are looking to sell, buy or invest in a business in India, please visit us at www.indiabizforsale.com or contact us at firstname.lastname@example.org to know more about what we do and how we can help you.