As advisers to growing businesses we are often asked whether it is better to set up a business from scratch or buy an existing business. If you are considering setting up and starting a new business you must consider a number of issues including:
The Market
- What is the market you intend to enter?
- Is it a market in its infancy, maturing or in decline?
- Is this market large enough for another business of this type?
- Is it easy for further competitors to enter the market?
- How long will it take to build up a customer base?
- How will your potential customers know you exist?
Premises
- Can you secure an appropriate location - What are the terms of the lease you have to commit to?
Human resources
- Can you find the people you require to operate the business?
Products
- Have you got a reliable source of supply?
- Have you got alternative sources of supply if your preferred supplier lets you down?
- Can you secure a long term relationship with the supplier?
- Is exclusivity an issue?
- Will the exchange rate be an issue?
Financing Issues
- How much do you need to invest in plant and equipment to operate the business?
- How much do you need to spend on advertising and promotion so that the market knows you exist and what is the most effective medium to use?
- What are the working capital requirements (cashflow) the business will need?
- What are the fixed overheads will the business have on a weekly, monthly and annual basis?
- How many sales does the business have to make before it breaks even?
- How long will it take for the business to reach breakeven point, will you ever reach it?
Reduce the risk to starting a new business - buy a business thats up and running.
Julie Millar - BDO Spicers
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