Typically, new businesses are based on the owner’s interest or passion, since business ownership requires a big investment of time and resources. Having previous skills or knowledge relevant to a particular trade or industry is also a plus when considering what kind of business to start. Regardless of the type of business, you must determine whether adequate demand exists for the product/service you will offer.
As to whether to buy or start a business, consider your goals and potential return on investment. An existing business should have established procedures and processes, operations, reputation, and a customer base. These are assets – and the reason existing businesses frequently sell at a premium. If the business is lacking in these areas (and priced accordingly), beware. Also, an existing business may have “baggage” that can cause problems for the future owner, whereas a new business can start with a clean slate.
While it may take less money to start a new business than it does to purchase a going concern, it takes time and can be very difficult to build the business. The new business also has no track record on which to base decisions. Significant working capital is often required to grow a new business. The bottom line is that every business purchase situation is different and should be carefully evaluated on its own merits.
