Entrepreneur – To be or not to be…


One way to financial independence is being a successful entrepreneur.  The number of business possibilities are endless, only limitation is your imagination.

In order to be a successful entrepreneur, you need to know a little bit about every job including CEO, bookkeeper, sales person, human resources manager, and laborer.  You may be doing all these jobs yourself.  This may sound unreachable, but if you acquire these skills slowly by starting a business from scratch, it is amazing how much you can learn.

No matter whether you start or buy your new business, you will be committing yourself to long hours and probably low pay, at least in the beginning.  We will compare some of the important factors for starting up or buying the business.

 Learning

With a new startup you may learn as you go however, pace of learning needs to be more rapid in case of buying a 1running business. However, extra points can be given if previous owner agree to provide training.

Flexibility

Although there is a low probability but you might find out you hate running your own business, With a startup you may be able to roll back before committing large sums of money which may not be the case with buying the business.

Pace and Lifestyle

For a startup you can probably run from home in your spare time and once it reaches a certain size you can do it full time. On contrary, if you buy a business you will be matching your lifestyle to that of the business.

Business relationships

With a startup building a network of customers and business connections who can provide advice is a slow process.  On the other hand if you buy a business you will benefit from immediate customer base.

Surprises

If buying an existing business you may have higher uncertainty and risk. You may inherit liabilities from previous owner that were not disclosed or assets may not be worth as much as expected

Financials

With buying a business revenue start coming in immediately from existing customer base. But that comes with an initial capital required for financing.

Overall buying a business is a more complicated path than starting it from scratch. You must do your due diligence to find out if all the information provided by the seller is correct. You will want to verify the value of assets, confirm that the financial statements truly represent the financial condition of the business, satisfy yourself that there is a good customer base, and ascertain whether there are any hidden liabilities.

When buying a business, another decision is whether to buy the shares or assets personally, or through a incorporated entity.

Buyer must do a thorough analysis of after-tax cash flows from the purchased business, comparing the scenarios of buying assets versus shares. Professional financial and legal help in this area is strongly advised.

The above text has compared only a few factors and not a complete list of everything that is involved in buying a business.  A professional accountant can help with your due diligence and quantifying your decision.

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