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Should You Buy An Internet Business Or Start an Internet Business?
By Mark Daoust
Starting your own Internet business is a major decision, accompanied by a lot of tough questions you must answer if you’re to make a go of it. Beyond your own skills and your goals for your new business, one of the most important factors to consider is whether you should start from scratch or buy an Internet business that’s already been established.
Buying An Internet Business
This option almost always involves more up-front expense and a much quicker learning curve than starting a new business, but balances it with a more immediate return on your investment with a proven history of success.
Pros Of Buying An Internet Business
- Return On Investment (ROI) – Compared to other investment opportunities, buying an Internet business is one of the fastest ways to generate a ROI. Since you’re “driving the bus,” you’ve got much more extensive control over how you achieve a return than you would with investments such as stocks or real estate.
- The Power Of a Proven Concept – Obtaining financing to buy an Internet business can be easier than starting fresh because an established business has a history that may make it more attractive to lenders. For banks and other institutions, financing a $750,000 business that has an annual return of $200,000 to $300,000 is likely to seem far less risky than a loan for $100,000 to someone starting with an unproven concept.
- A Brand Name That Opens Doors – You’re not just buying an Internet business—you’re buying a brand. All the hard work the previous owner invested in establishing the company in the marketplace, as well as forming relationships with clients, leads, and vendors, can give you a big leg up in closing deals and attracting new business.
- The Freedom to Concentrate on the Big Picture – When you buy an Internet business, the seller has already attended to the support tasks of starting a business. These tasks—building a website, choosing or designing logos, establishing policies, etc.—are critical, but they’re also extremely time consuming. Buying a business means you can focus on aspects that brings in increased sales and keeps the business growing.
- Financial Flexibility – Purchasing a business that’s already generating income means you can generally work out an arrangement that lets you account for existing debt, draw a salary for yourself, and still invest in growing the business. You’re investing in a business that begins to pay you back right away, instead of taking years to produce a return that may never actually occur. Many people get burned out when they don’t see returns for a long period of time after working so hard, so there is definite benefit to stepping into an established, successful business.
Cons Of Buying An Internet Business
- Significant Up-Front Expense – While a lot of the groundwork has been done for you and the foundation exists to build stronger sales and a loyal customer base, these benefits do come with a price tag that’s higher than starting your own business.
- The Due Diligence Process – Even at its most basic, buying a business can prove to be a protracted process that tests even the strongest will. Before you can take ownership of your new business, you’ll need to complete the due diligence process to:
- Assess the financial health of the business.
- Catalog its assets and liabilities.
- Uncover any hidden problems.
- Ensure the business is in compliance with all applicable legal regulations.
- Due diligence exists to protect both the buyer and seller, and it’s a necessary—if occasionally frustrating—part of the purchasing process.
Starting a New Internet Business
Starting your own business from the ground up is one of the most cherished American dreams, and as of 2013, nearly 500,000 new entrepreneurs enter the market every month.
Building your own business can be much more affordable than buying an existing one, but the sweat equity you’ll have to invest often makes up the difference—and then some.
Pros of Starting a New Internet Business
- Greater Affordability – You don’t have to drop $300,000 to start a new business. Some of the most famous and successful companies in the world were started in their owners’ garages on a shoestring budget. Unless you’re starting a company that requires a heavy investment on the front end (an industrial manufacturing company, for example), starting your own business is often far less expensive than buying an established enterprise with a big market presence.
- Total Brand Control – Instead of adapting to (or carefully adjusting and updating) an existing brand, you get to create one that suits you, and build it as you see fit.
- Personal Satisfaction – Building a company from nothing can be incredibly fulfilling, both personally and financially. Setting your own schedule, relying on your own creativity and skills to succeed, and (depending on the business) being able to work from just about anywhere are powerful rewards.
Cons Of Starting a New Internet Business
- Greater Financial Risk – Starting a business from nothing can be a rewarding experience, but it’s also an extremely risky one. Without a proven track record or customer base, you may find it difficult to obtain the funding you need, which can limit your working capital, or even the overall scope of your business. In addition, your personal income may fluctuate significantly as you work to get your business off the ground.
- A More Significant Hit To Work-Life Balance – You’re investing less cash up front to start a business, but the longer hours necessary to get it off the ground may end up costing you in other ways, including your health, free time, and relationships.
- Relative Invisibility – You might have the best products and services in your niche, but until the buying public knows as well, it’s going to be an uphill climb to establish yourself in the marketplace. In addition, effective marketing requires a significant investment. You can end up spending a lot of time and cash that might take a while to generate a return as you find your place in the market.
- More Hats than Bartholomew Cubbins – Every entrepreneur handles many roles as they oversee their business(es). But like the befuddled lad Dr. Seuss created, startup owners have a bewildering array of hats that more established businesses have already settled, or have developed processes to handle. These include basic branding, finding reliable and trustworthy suppliers and service providers, and designing, building, and hosting the company website. Every hour you spend on “housekeeping” is an hour you’re not selling, creating, or otherwise generating income for your business.
Whether you’re buying or creating, building a new Internet business is an adventure—one fraught with risks as well as rewards—that can lead you to financial and personal fulfilment. Taking the time to weigh your options, your budget, and the scope of your ambitions, and understanding the market you hope to conquer, can help you choose the path to success that’s right for you.
If you want to get a sample of some of the types of Internet business that are put up for sale, browse our current Internet businesses for sale and be sure to register to receive new listings updates.