Business Setup or Acquisition

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Inspiration

Entrepreneurs are often encountered with questions like how to start a business, which business will be fruitful, how much funds have to be invested, what will be capital inflow, gestation period and most importantly whether to set up a new concern or acquire an existing business. The last question is the most critical one because many new queries take birth out of it such as whether it will be proprietorship or partnership or company form or any other type of entity. This write-up will guide you regarding the last but such critical aspect. An entrepreneur can take into account following answers while making a decision on this point:

  • If you plan to start from scratch, then various additional things have to be organized such as a proper place (depending upon whether you venture into manufacturing, trading or service sector), human resources, machinery or computer systems, as may be required, market survey and disadvantage of lack of experience.
  •  If you plan to acquire an existing business then there may also be some disadvantages such as striking the right deal, timing of deal (may be you are not ready with funds when appropriate deal is offered), risk of wrong valuation of assets, obsolete machinery, their human resources may not be appropriate for your work environment, risk of deal break up after having half of the funds invested etc.
  • Hence, there is no strict answer to whether an entrepreneur should go for former or latter option because it all depends upon business needs. For example, if you want to go for government tendering then they often ask for few years of existence, in that case, one can purchase an existing business. Secondly, if one strikes an existing business that has goodwill in the market then it can be acquired. Hence, why seller is selling his business in the key area to be analyzed.  In the same way, some basic knowledge of the sector (such as previous job experience) should be there if one has to start from the scratch.

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