To Build or Buy?

Introduction

Most entrepreneurs are faced with a dilemma of whether to build a business from scratch or to buy an already existing one. However, purchasing an already existing business is more beneficial than starting a new one. To make the right decision, the businessperson should factor in some issues. First, the entrepreneur should have a well-laid plan of how the business will compete in the market. Second, the businessperson should consider the best form of business ownership and ensure he or she has the right partner. Lastly, the industrialist should devise a justifiable business plan to ensure the enterprise’s success. Therefore, it is imperative to discuss fundamental factors that exhibit the importance of buying an existing business rather than building a new one.

Background Information

Coffee shops are doing in most parts of the world, especially under effective management. Therefore, for this discussion, we are going to focus on coffee shop business. In this industry, there are various competitors, and to remain relevant, the entrepreneur must innovate new ways to cope with competition and still make profits. In fact, to compete with the already established businesses, smaller companies must create a strategy to ensure that the business remains pertinent and competitive. However, to identify and develop a justifiable business, a competitive advantage is one of the most critical actions in any business venture. The course is usually perplexing for the small business owners.

However, the small business could employ various strategies to compete with the existing businesses. Firstly, the corporation should use customer value by lowering prices to attract clients who may not afford the high rates in other outlets (Longenecker & Moore, 2008). The business should ensure speedy delivery of the customer orders, thus ensuring that the customer’s time is not wasted. Secondly, the business should enhance the value of their product and services, offering superior products compared to what the competitor is presenting, an instance that can be realized through product promotion and advertising (Longenecker & Moore, 2008). Thirdly, the business’s location is crucial since it should be easily accessible by all the target and potential customers. By selecting a perfect site, the aspect will guarantee customer convenience, thereby increasing the competitive advantage. In addition, the expediency can also be achieved by going to the customers and making deliveries of their orders.

To remain competitive, the small business should offer a wider selection of product brands and services at a substantiated price. Through this aspect, their customers will have more products to choose from, keeping the business ahead of their competitors. The business can also employ product differentiation to create competitive advantage. Consequently, the customers will be able to distinguish one product from the other (Longenecker and Moore, 2008). Under those premises, the business can offer other services that are provided by their competitors who do not offer them effectively, including delivering the product and employing technology to improve customer service.

Buy or Open a New Business?

The aspect of buying an existing business or starting a new comes with their shortcomings. Nevertheless, purchasing a prevailing business has fewer risks than starting a firm from scratch (Voziliks et al., 2015). There are various reasons why one should consider obtaining an already existing business. Firstly, the tedious startup effort has been made because the business is already established. For the already recognized enterprise, the procedures are already in place, and once the business is acquired, one is only supposed to amend some sections of the plan, hence, continue to operate. Secondly, buying an existing business means there will be a direct cash flow since the business is already operational. Therefore, the return on investment will be instantaneous (Voziliks et al., 2015). Thirdly, by buying an existing business, it is likely that you will acquire the staff, suppliers, equipment, goodwill, and, most importantly, the customers.

Therefore, the most vital thing to do is to work on satisfying the existing clients and attract new customers. Fourthly, since the business already has a history, the records will paint a picture of what is expected from the business, making it easier to attract investors and secure loans. Lastly, since the employees and the managers must be retained, they will have the much-needed experience in the business (Voziliks et al., 2015). Thus, ensuring quality products and perfect customer service will be an advantage to the business since one does not have to spend more time and money training new employees or managers.

Ownership

Considering the current financial situation, a partnership would be the most suitable form of ownership. In this form of a proprietorship, various advantages come along with it. The business entities are legally separate from the partners in a partnership set up. Thus, if a partner faces a legal process, the business operations will continue (Miller & Jentz, 2010). Secondly, purchasing the coffee shop as a partnership will increase the ability to raise funds to purchase the entity since the partners will contribute the required amount of money by spreading the responsibility for them. Thirdly, given that the partners have a different background regarding education, the business is likely to benefit from the complementary skills of the two associates. A partnership broadens the pool of knowledge and contacts while may also serve as a marketing strategy for friends and family who are considered potential customers (Miller & Jentz, 2010). Fourthly, a partnership may help save on the cost of operations, especially in hiring employees, since each associate specializes in a given aspect of the business. Therefore, there will be no need to hire an employee where one of the partners has the expertise in a certain area. Lastly, in a partnership set up, the stakeholders can support each other morally, especially when the business is not doing well, by encouraging each other. In essence, partners get more creative through brainstorming, ensuring that the business continues growing.

Business Plan

The Delica Coffee Shop is focused on becoming the major joint for all coffee lovers. Our outlet will be the best place where you can meet with friends or read a book while enjoying our coffee. The location of the shop is near a university and a high school where the students are the target customers.

Objectives

To be the best Coffee Outlet in the area.
To turn in profits within the first operational month.

Key to Success

Excellent marketing strategies that will build a base of loyal customers.
Train employees to ensure the best preparation of coffee.
Design the outlet to make it visually attractive and classy.

Mission

The Delica Coffee shop will seek to offer a comfortable outlet for all our customers to meet, socialize and relax in a comfortable environment. At the outlet, the customers can relieve their daily stress since it has a convenient location and our staff are friendly and offer high-quality products and service.

Company Description

The Delica Coffee shop is a limited company that sells coffee, snacks, and other beverages, but we do not sell alcoholic drinks at our outlet. The channel is located about a kilometer from the University of Michigan, while David and Mike fully own the shop since they purchased the outlet from its previous owner.

Company Ownership

As stated earlier, David and Mike fully own the Delica coffee shop at 51% and 49% of company shares, respectively.

Location

The company is located near the University of Michigan, which is a walking distance from the institution. The coffee shop will offer the best coffee in the area as we plan to give our customers free internet access whenever they are at our shop. Through this initiative, we will have more customers, while people can work from there or hold meetings as they enjoy their cup of coffee or any other beverage or snack from our outlet.

Product

Our main product will be coffee and other related products. The quality will be the best since we shall be using the high-quality ingredients and follow strict preparation guidelines. The outlet will maximize by selling espresso drinks, brewed tea, and other refreshing beverages. At Delica, we will also offer sandwiches, pastries, and salads. Lastly, we will also sell coffee beans to the willing customers.

Market Analysis

The coffee market in the United States is growing steadily. People are demanding more coffee to enjoy while relaxing and socializing. The satiable need for coffee shoots up mostly during the winter season since it offers warmth during the season. At Delica, we will make sure that we offer the best coffee where people can meet, relax, and socialize. The location is perfect since it is easily accessible to everyone and is next to the street. Moreover, the locality favors the business as it is close to the University of Michigan, and the students who are some of our target markets can easily walk to the place and enjoy their coffee.

Management

Mike and David will fully own the Delica Coffee Shop, who hold a Bachelor’s Degree in Economics and a Degree in Business Administration, respectively. Therefore, combining two individuals who have professional training in related business areas will make a great management team. However, the current manager will be retained to oversee the daily activities of the outlet since he has the required experience in the industry.

Marketing

We will focus on marketing our coffee to gain a solid ground for our products. By doing so, we will develop a higher position in the market and work hard to maintain it by maintaining contact with our customers and ensuring we offer the best product and excellent service in the industry. Our sales people will be given the best training to ensure that the customers are fully satisfied with our products and services. We believe that giving the customers what they want is crucial and will have them come again and market the outlet through word of mouth, an important and cheap marketing strategy.

Financial Projection

The owners of the coffee shop contributed enough capital to purchase the outlet. We hope that through excellent service and management of the outlet, we will grow a wide customer base. In fact, we project that the company net worth will double in two years’ time. In essence, we will work hard to ensure that the company maintains a healthy and steady cash flow, which will allow us to secure loans for expansion, service improvement, marketing, and future development.

Conclusion

As evident from the presentation above, it is clear that it is more beneficial to purchase an already existing business than starting a new one. The paper has also elaborated on the significance of collaborating within business since it has more advantages than a sole proprietorship. As such, it is imperative to develop strategies to ensure the business remains relevant and competitive. Lastly, the entrepreneur should come up with an elaborate business plan to ensure the success of the business

References

Miller, R. L. R., & Jentz, G. A. (2010). Fundamentals of business law: excerpted cases. Mason, OH: South-Western Cengage Learning.

Moore, C. W., & Longenecker, J. G. (2008). Managing small business: an entrepreneurial emphasis. Australia: South-Western/Cengage Learning.

Vozilikis, Mescon, Feldman and Liguori (2015) Entrepreneurship: venture initiation management and development. New York: Routledge.