Often, clients come to us with the question: “Which is better: buying a ready-made company or developing your own business from scratch?”. Although the first option may seem more attractive because of the already studied market, established production capacity, and customer base, it is “a pig in a poke,” which carries many risks. But first things first.
Pros of buying a ready-made business
- With an intelligent company choice, this option is much easier than starting from scratch
- There’s already a ready-made idea, reputation, and customer base
- There is room, production capacity if you need it, and staff
- The market is studied, and there is already a proven workflow
- There are the necessary licenses if they are needed
- The enterprise is already generating income, and you don’t have to spend time and effort to make the business profitable
Why buying a ready-made business is always a risk
First of all, you should ask yourself two questions:
- Why is the company being sold?
- Will this business make you a profit if it continues to grow?
There may be several answers to the first:
- The company’s owner has decided to step away from the business or change the scope of their business
- The owner decided to take over another, more profitable company
- The owner’s relationship with the founders of the business has soured
- The company is no longer profitable and may be in debt
And the last option, unfortunately, is the most common, although it also happens that the owners in this situation may give you other reasons for selling.
Hence the risks are born: in addition to debts and lack of profit, the company may have a bad reputation, be not only unprofitable but loss-making, or even have serious problems with the law. In addition, the company may have an incompetent staff or poor equipment, and the contract to lease the premises will soon expire. Also, there’s always room for the human factor: due to a change of management, personnel may begin to lay off en masse. Of course, you need to have particularly bad karma to get on all these options, but anything is possible
- It is necessary to carefully examine the documents between the business owner and the landlord
- You should also check the financial documents to see if the company is in debt
- Check whether the business is listed on the bailiff and tax office websites
- Hire auditors to estimate how much it would cost to develop the business based on the information already checked above and to assess whether the value indicated by the owner is consistent with the quality of the “product” you are purchasing
- Verify the reputation of the company
- Hire a “mystery shopper” to see how the company works with clients
Such procedures can help determine the company’s background and help decide whether it is worth spending money and effort on its further development. But, again, they will cost a lot of person-hours and funds in total.
Starting a business from scratch is your best bet
As experts in the field, we recommend starting your own business. What are the pros of this option?
- Freedom of action. You can realize your wildest ideas and create a truly unique product on your own. Your plans are limited only by your imagination, budget, and legislation
- Cost. Registering and starting your own business often costs much less than buying a ready-made company (especially with all the risks)
- Safety. Again, you have already studied the niche in which you will work, assessed all the risks, and know what you are dealing with. You’re more secure compared to having to look at “how deep does the rabbit hole go” when trying to figure out the legality of doing business with someone else’s company
- Time savings. You don’t have to take the time to find a really profitable ready-made business and make sure it’s worth buying. Especially if you’re checking out multiple companies
- Great prospects for development. Very often, a ready-made business has already reached its peak, and there is no chance of generating more profit. In your company, you can determine your own ways of development and make more profitable decisions in time, which will help you reach much more significant amounts of income
- There is no need to work through mistakes. If a business is sold because of low profits, it means that somewhere along the way, the owners made poor decisions. Correcting their missteps will cost you a lot of time, money, and nerve cells
If you are planning to register an LLC in Ukraine, or are ready to register an international company in the EU, the USA or Asia, our team will be happy to help you with this. Our team is ready to provide consultation on these issues. Our business hours: Monday to Friday, 9:00 AM — 7:00 PM. Contact us via WhatsApp, Telegram, or Viber, or submit an inquiry through our online form.
