The decision to start a business vs. buying one is a difficult, but important one to make. Many experts would argue that buying a business is better assurance of success. Their reasoning is that the business already has made it through the start-up phase and has established a client base. Nevertheless, the sweat and hard work that goes into starting a business can also be rewarding from a different stand point. The feeling of accomplishment from starting a business can more fulfilling. But, before you consider starting or buying a business, you should investigate it carefully and learn as much about the business and the industry it operates in.

 Starting a Business

While many analysts have shown that large percentages of new businesses fail within the first year, new information suggests otherwise. According a report prepared by the U.S. Small Business Administration, following a 1995 White House Conference on Small Business, 122,253 new firms were started in 1993. Of these, only 19,695, or 16 percent, failed. Further, according to a study commissioned by the American Express Small Business Services and the National Federation of Independent Business four years ago, an overwhelming majority–77 percent– of businesses succeed.

The reasons for success identified by the study were:

• Self confidence, vision, intellectual creativity and a consummate sales personality;
• Excellent communication skills with emphasis on service rather than price;
• Good health, high energy and sufficient capital to sustain operations and fund growth;
• Hard work with full time–approximately 60-69 hours per week–devoted to the business.

So, if you are thinking about starting a business, you may want to take a hard look at the characteristics listed above of those businesses that have succeeded. Several educational and practical resources are available to help you succeed. The Small Business Administration (SBA) is a good place to start. The Service Corps of Retired Executives (SCORE) is a good resource for business advice from those who have experience running a business.

 Buying a Business

Buying a business is growing in popularity. An estimated 120,000 businesses change hands each year at an average sales price of less than $200,000, excluding inventory and real estate.

Rather than starting from scratch, buying a business can be easier. For one thing, it is often easier to obtain financing because of the established track record of the business. Further, its established client base assures some level of a revenue stream. Nevertheless, buying a business does have its downfalls. A business’ track record could bring with it some skeletons in the closet. That is why it is important to investigate it thoroughly and consider all options. Some other things to consider is what are you buying–the stock or assets? An asset purchase reduces the risk of acquiring unknown liabilities. Further, how you will finance the purchase–with a bank loan, an earn out, seller carried debt–is also important to consider.

The following are some things to do and know about buying a business.

• Contact a business broker and let it be known that you are in the market for a business.
• Check out all the facts and records related to a business you are interested in buying. You will likely be asked to sign a confidentiality agreement before being able to review proprietary and financial information.
• Prepare a business plan to focus on the goals and financial needs of the business you are considering.
• Consider getting some professional help from an accountant, particularly if the financial statements have not been audited, and an attorney.
• Build a relationship with the owner. Visit the business site and meet with employees.
• Inquire as to whether the seller can stay on as a consultant.

There are many good resources on the Internet if you are considering starting or buying a business. The following is a list of the best web sites and a brief description. Be aware, while not listed, there are tons of Internet sites of business brokers. Many of these sites allow you to search a list of businesses for sale on the Internet.