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Why purchase a company? And why purchase a company rather than starting from scratch?

Ready to sell your business?

Why purchase a company?

This is a question I’ve posed to myself. As a former long time corporate employee I’ve enjoyed all the
companies I’ve worked. Working for a stable growing company had always been a source of security
for my family.

Why would anyone in their right mind ever want to leave a successful career to enter the unknown? It
does bear some discussion. I guess it’s because I’ve always been driven and hard to satisfy; maybe
it’s due to my competitive nature. I viewed the risk as minimal, because if for some unseen reason the
company I purchased failed, I knew that I still retained the skills that brought me success and could
always go back to the corporate life. Additionally, being your own boss is incredibly liberating! It does
have some unique challenges as “the buck stops here”; meaning every decision lives and dies with
you. If that statement scares you, do not purchase a company. But for me, it was like breathing new
life and challenges into my career that I have no regrets to this day. Those were the items that factored
into my personal decision to purchase a company.

Why would I purchase an existing company versus starting one from scratch?

Unless you have other means of support, a start up company can be a real challenge. There is outside
competition, upfront costs, unknown factors such as demographics, economy variability, financing,
marketing, staffing, and many others. All of these require a learning curve and distract you from the
reason you wanted to be your own boss in the first place; to sell your goods and/or services. More
importantly, is the length of time it’ll take to become profitable and have a positive cash flow. How long
can you operate a company that’s losing money?

Purchasing an existing company is much different. An existing company has a proven “track record”; it
has verifiable financial data, cash flow, market share, staffing, sales volumes, brand recognition,
marketing, and one item that’s hard to qualify but very real, “good will”. Purchasing a well run company
with a strong reputation is a recipe for success. Everything involved with a “start up” is already in place
with an “existing” company, your job is to simply takeover where the seller left off and in most cases, the
seller will continue in a consulting role until you are ready to run on your own. The company I
purchased was profitable from day one, both my wife and I left our corporate jobs and never looked
back. Here’s the real kicker, we’ve had four competitors open in our trade area within two years of
purchase and the impact was minimal. That’s because we were firmly established and had an
excellent reputation. The four competitors have continued struggle as they’ve been fighting for new
growth simultaneously.

We only source proven companies with the potential for future growth. Our company represents the
seller, but we wouldn’t be in business long if we didn’t work closely with the purchaser to ensure that
the business was the correct fit and met their requirements to purchase. This result is a win-win for all
parties and that has and always will be our goal.

Please contact us if you have any questions or want to learn more. – Kind regards, Doug Scherber, Managing Partner and Houston Business Broker for Texas Business Brokers.

Doug Scherber Houston Business Broker

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