You might be reading this title and thinking “wait, what…I thought these guys promoted entrepreneurship?”. We absolutely do… we preach it and practice it. But we are firm believers that the safest, most effective, and overall most profitable path is not through a startup venture.
Here are our 5 reasons why.
1) No proof that your idea will be successful
Ideas are awesome….we have them all the time. But even the greatest ideas in the history of mankind have failed to make money for a variety of reasons. And even if a similar idea to yours is seemingly making a fortune for someone else, that still isn’t proof that your version will actually succeed…or at least not at a level where the return is worth the risk. Without a track record of sales and demand for your product or service, you’re rolling the dice.
2) You have no trained staff
Employees are the most difficult part of any business, startup or existing, however it’s amplified in a startup because your staff is green. They do not have experience with your company and it’s specific products or services yet, because your startup just began to exist. When you buy an existing company, you are acquiring their staff who are already familiar with your products, services, customers, and everything in between. You will still have trouble with employees form time to time, but at least you bypass the steep and often painful learning curve.
3) No process or procedures in place
In a startup, you may have it all figured out in your head….but transferring that to reality is difficult without stringent processes and procedures. You’ll have to develop those which is no easy task.
4) You have no customers
For the most part, when you dive into a startup you are at ground zero with no customers. For some that is the fun or exciting part, but in our view it’s also the dangerous and expensive part. You have bills to pay from day 1, and without customers you are either going in debt to pay them, or going under. It’s not as easy as the supposed “experts” make it seem to acquire customers and sales with a startup…it takes time and money with no guarantees.
5) Difficult to get financed
This is probably the biggest drawback to a startup. Sure, you here about startups getting millions of dollars worth of investment capital, but what you don’t hear about is what they had to give up to get it, nor do you hear about the hundreds of thousands of startups who fail to get financed. Banks essentially WILL NOT loan money for startups without asking for your first born child as collateral (yes, that’s an exaggeration, but you get the point), so you’re left to beg borrow and steal (hopefully you don’t actually steal) for it, which takes a ton of time and attention away from what you actually want to be doing…running your company and again there is no guarantee that at the end of that long road, you actually come home with enough money to successfully (key word “successfully”) start your business.
Buying an existing, well managed, profitable company is the remedy for each of these 5 problems, and is the only strategy that we recommend for Entrepreneurs. If you haven’t already, please join our FREE Business Buying Support group here where we discuss these topic and more and try to give you the assistance you need to buy a successful business of your own.
Institute for Business Acquisitions