Building a business is more costly than buying it
Yes, you heard it right building a business is costlier than buying an existing business.
There is a common misconception that it is costly to buy a business as we have to pay amount at the beginning but often the bigger picture is missed by them which will prove that buying a business in fact is not as costly as building a business
1. Time to build a business: Starting a new business from scratch requires lot of time. Developing clients right from Zero required a lot of time, sometimes it stretches into years. Building a clients trust is not easy plus meeting fixed cost even when there is no business. On the other hand when you purchase a new business, you have to pay at the beginning but that can be recovered since the business is a running business. Purchase cost and other fixed cost can be easily met through the running business.
– It is easier to secure finance
when a running business model is available since running business gives the lenders a confidence that interest payment will be regular and there would be no defaults in repayments, on the other hand when you decide to start to build a new business financing may not be available that easily to meet the fixed obligations e.g. rent, salary, etc and you can end up paying much higher interest cost to secure finance.
3. Focus on growth – When you already have a steady business you can focus on growth very easily sometimes immediately at the beginning since the business already has an established brands in the eyes of customers also instant access to customers makes a huge difference in growth, whereas when you start building a business your first focus is to breakeven and second is to maintain the stability in business which may take years and then growth stage comes which takes a lot of time. When growth takes place the cost of buying a business can get recovered very quickly since the business is already functioning.
In building a business initially the cost may be less but when you compare the total net present value of building and buying a business, in majority of cases buying a business is more beneficial