Buy vs Build Online Business?
About 90% of startups fail within the first few years. So why do people continue to start these businesses from scratch? In this video, I’m going to share everything I know about building businesses from scratch, investing in VC-backed businesses, and also in brokering more than $120 million worth of passive online businesses. So I’m going to talk about the pros of starting from scratch. And I’m also going to compare and contrast that with buying an already established business that’s generating cash flow from day one, what are the pros and cons of that. So let’s go ahead and dig into buying a business versus building one from scratch. So the biggest difference I see between buying an online business and first building an online business is whether you have more time or more money, if you’re looking to accelerate the process of just generating cash flow, then buying a business is going to be the best option for you. But you’re going to need around $150,000 of liquidity to acquire one of these businesses. And that’s just the starting point. On the other side, if you have a lot of time, if you have two or three years to kind of get your hands dirty, and figure things out, then building a business from scratch is probably going to be the best option for you. But keep in mind, as I mentioned before, 90% of people who start these businesses end up failing. Now, if you’re going to buy a business, you’re going to be acquiring one of that 10% of businesses that have succeeded, and they’ve succeeded year over year. So you’re gonna really reduce your risk by already acquiring a business than starting a business from scratch. And I’ve seen people pour 200 $300,000 of money into developing expensive software for expensive businesses, and they’re not generating a dime of actual profit. So buying one of these already established businesses is going to really reduce your risk. And it’s going to have a lot higher chance of success than starting from scratch.
So the timeline to success for starting a business from scratch is usually between 18 to 24 months on average, a lot of times it’s going to take a lot longer than that. Now, the timeline for buying a business is going to be day one, you’re already generating money, and there’s money flowing into your account. And all you have to do is worry about maintaining that business. And growing that business, the pros of starting a business from scratch are maybe you have a very particular idea or problem you’re looking to solve, it might be a lot harder to find a business to acquire, because maybe nobody’s doing it yet. Or maybe they’re doing it and they just haven’t had this business readily available for sale. So if you have a very particular skill set, you have a very good idea, I suggest building that from scratch, or at least testing that idea to see if it’s going to be a worthwhile business to spend the next few years building, I think a lot of founders waste a ton of time developing the product before they’ve had that proof of concept. So I say in the first week or two, try to get people’s credit cards out, see if they’re gonna buy your product or service before you start building it. And this can be a straightforward way to really test the market to see if there’s going to be any demand for your business, or for your service before you waste a ton of money and a ton of your time building a product that nobody actually wants.
So the pros to buying an online business is day one, you’re gonna have cash flow, this cash flow can be from $10,000 a month in profit, all the way up to the hundreds of $1,000 a month in profit. So the pros here, you’re gonna have cash flow from day one, and all you have to worry about is maintaining the business, which normally only requires a couple of hours a week of work. And then number two is scaling this business as fast as possible, maybe reinvesting some of that profit into marketing campaigns that are going to generate a lot faster ROI. Now in my experience alone, I’ve acquired businesses and software businesses, where I’ve gotten my ROI back in under eight months. So this is definitely possible with the online space. And after that eight months, it’s just cash flowing. And I spent about an hour per month maintaining this business. So the main cons I see from starting a business from scratch are one, you’re going to have to invest two to three years of your time before you even get profitable. Also, there’s gonna be some startup costs involved. Again, not too many businesses are going to be free to get started. But a lot of businesses are going to be cheaper than others. So if you’re gonna get into Amazon, FBA, or E-commerce, there’s gonna be a lot more startup cost there than if you’re just going to create an online program, or an ebook or something like that those two are going to have drastically different startup costs, but they’re probably going to take the same amount of time to become profitable. And on average, most of these businesses take at least 18 to 24 months to actually make $1 in profit. So that’s gonna be the biggest con is gonna take a lot more time and a lot more money. And again, 90% of these businesses fail, so the statistics are not in your favor for success.
So the biggest con, I see to buying an online business is you need some big investment to get started, you’re gonna need around 100 or $150,000, on the low end, just to find enough inventory to really find a business that’s going to fit your skill sets. So the second con, I see for buying online businesses, is it’s kind of hard to fund these if you don’t have $150,000, in your bank account, or with stocks, or crypto, or some sort of liquid asset, it might be a little bit difficult to get started with this type of business. The other con I see is maybe you just don’t know how to run an online business. And this is exactly where I help, I can help you get financing options, and I can help you find a business that’s going to meet your skill set. And I also help people grow these businesses and maintain them after they’ve acquired them. So if you’re interested in acquiring an online business, I’ll leave some details below in the description, where you can set up a free consultation with me to figure out if buying an online business is going to be the best option for you. So these online businesses are what I’ve helped broker more than $120 million worth of. And these businesses are already established, they might have been around for two to three years, and they’re already cash-flowing money.
So you can see all the financial data, see how the business is doing well, maybe it has year-over-year growth, and it’s good to really reduce your risk from starting a business from scratch. So around 90% of startups actually fail. So if you’re able to buy one of those 10 percent, that succeeded, you’re gonna have a much higher chance of just worrying about growing that business, instead of starting from scratch, wasting two to three years of time figuring out if it’s going to be a big success or not. But of course, you’re gonna have to pay a little bit of upfront capital for these businesses. So for a previous example, about a week ago, I just helped somebody acquire a $125,000 business that’s generating around $5,000 a month in profit, this business is only requiring around one to two hours per week of work. And it’s going to be something that I see growth potential to build and grow to burning more than $10,000 a month in profit, it’s much easier to grow a business that’s already established than to try to get something from zero to $10,000 a month, of course, it’s going to be easier to go from $5,000 to $10,000 a month. So the zero to $1,000 is almost impossible.
And again, 90% of these businesses fail. And that’s why there’s so much success in business acquisitions, you can already start three years ahead of your competition and just worry about maintaining the business and growing the business. And it’s going to yield a lot of great results. Now, these businesses that you can acquire are going to range from $150,000, all the way up to $10 million. And they’re going to be based and valued solely on how much money they’re earning in profit, this profit is going to be based on the trailing 12 months. And then it’s normally going to be around 30 to 40x, that monthly net profit. So if you have a business that’s earning $10,000 a month in profit, that business would be valued at around $300,000 On the low end, or maybe $450,000 on the higher end. And you can see after you acquire this business, if you do nothing but maintain it, within around 30 months, you’re gonna get your initial ROI back. And if you grow the business, you’ll get it back a lot faster. So in my personal acquisitions, I’ve received my return on investment in under eight months. So after eight months, it’s only cash flow and it only profit from there on.
So the great thing about online businesses and acquiring these online businesses is they have every passive business out there. They have software, businesses, ebooks, eCommerce businesses drop shipping, and they have everything we’ve talked about today. So if you’re looking to get a head start and acquire one of these businesses, you’re going to need a few startup costs and usually, it’s going to be around the $100,000 minimum. So if you made it this far, thank you so much. Make sure you go ahead and like this video, hit the subscribe button, and turn on the bell notification icon to get alerted about every week that I’m publishing new videos. Take care and have a wonderful rest of your day.
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