If you want to get rich, many people would advise you to start a new business.
They point to the statistics that say you have a better chance of getting rich if you start a new business.
However, they did not point it out correctly. Buying a business is another way to get rich.
If you take a look at Bill Gates and Warren Buffet, you can see the difference. Bill Gates started a completely new business, and got rich. Warren Buffet bought businesses after businesses and got rich.
That is why buying a business is another way to get rich.
Why is buying abusiness better for some people?
A completely new business has very high risk of failure in the first year. It is hard for a new business to survive to an extent when investors want to take over.
Once the business reaches a stage where the owner can cash out by selling out, the business is rolling in money.
Some people like the challenge of starting a new business, and see it grow. However, they are not comfortable with managing an existing business. They do not have the managerial skills required to stabilize the business.
That is the point when they start to look for buyers.
If you buy an existing company, you know how well the company had performed. You know how well the business can cope in the current market competition.
You know the product. You can talk to the employees.
If you are an employee taking over the business from the owner, you are in an even better position to understand the operation.
That is why it is less risky to buy an existing company.
The problem is the financing. You need to convince the bank to loan you the money
Bear in mind that you cannot simply return the company to the owner, and back off. In many instances, there is no way out except to see through the success of the entity.
While it is easier to manage an established company, that does not mean you will find it easy to recoup your investment.
In many cases, the founder of the company keeps 20% equity. This forces the founder to take an interest in the daily running of the operations.
You can gain valuable expertise from the founder. Both of you can get rich together with the growth of the company.
In the corporate world, merger and acquisition is the way to create a mega corporation. You can start to buy businesses after businesses, so that you can become a billionaire.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways. Personal Finance is about money, from making money to investing money. Retirement in Asia contains resources on retirement planning.