In the August 12, 2011 Wall Street Journal, John Bussey wrote, “Shrinking in a Bad Economy: America’s Entrepreneur Class.” He discussed how startups and the jobs created by new businesses are at a low point not seen in decades and questioned what that will mean for the next generation of entrepreneurs. See it here.
The economy has been rough on new businesses. Heck, it’s risky starting something at any time much less in the middle of the worst recession in 80 years. One reason is that new businesses haven’t yet demonstrated their competitive advantage. Couple that with tough-to-get financing, weak demand and the fact that entrepreneurs from around the world have access to the same markets with lower overhead and it’s a formula for a rough road to success.
The above is all the more reason to buy a business. One with customers, cash flow, market share and a competitive advantage. Of course it takes capital to buy a business, usually two to three times your annual salary is needed for the buyer’s downpayment.
So why risk your money on an unproven idea when you can walk into a salary and profits from day one? Perhaps because you’re an idea person not a manager. Maybe you like the thrill of creating something and being on the edge. Or, you don’t have the capital to buy a business but do have family income so putting in sweat equity is the best option.
However, if you do have capital, have managed people, processes, money and systems, some leadership skills and want to have that immediate cash flow then you should buy a business. You should buy a mature and profitable company; one you feel you can add value to and grow.