Chris Allchin, a seasoned entrepreneur and business investor, has seen it all in the world of business acquisitions and startups. With over 15 years of experience buying, selling, and scaling businesses, Allchin has learned valuable lessons that make him a strong advocate for buying existing businesses rather than starting new ones from scratch. In this article, we explore Allchin’s reasoning behind this approach and his top tips for those interested in purchasing a business.
The Challenges of Starting a Business
Starting a business can seem like an exciting venture, especially with the dream of building something from the ground up. But Allchin warns that the process can take longer and cost more than most people anticipate. “I’ve started as many businesses as I’ve bought, and it takes longer than you think,” he explains. “You might tell yourself, ‘In 12 months, I’ll have this firing,’ but before you know it, five years have passed and you’re still on the treadmill, struggling to make it happen.”
He points out that many entrepreneurs fall into the trap of thinking that simply registering a company and creating a website equals having a business. “You don’t have a business, you have a company with a website,” he notes. “A website is just a star in the sky unless you market it, and registering a company is just a formality.”
The Power of Acquiring an Existing Business
One of the main reasons Allchin favors buying existing businesses is the speed at which you can achieve success. Unlike starting from scratch, buying a business that is already operational means acquiring systems, staff, cash flow, and established customers. “You get the bells, whistles, systems, people, staff—the whole thing,” he says. “Starting a business correctly is expensive, and you just don’t realize it yet. When you buy an existing business, you bypass many of the costs and risks associated with starting one.”
Allchin believes that acquiring a business offers a safer and more profitable avenue to success. “With an existing business, you have cash flow, which gives you the choice to implement management and scale, whereas starting a business often means draining your resources with little to no return for a long time,” he explains.
Tips for Buying an Existing Business
For those considering the option of purchasing a business, Allchin offers several key pieces of advice to help navigate the process.
1. Don’t Use a Broker
While brokers can facilitate the buying process, Allchin advises against using one for a business acquisition. “Brokers make it transactional. They just want you to hand over money and close the deal,” he says. “You need to be in direct contact with the seller to understand their motivations for selling. This helps you structure a deal that benefits both parties.”
He adds that negotiating directly with the seller allows you to create a win-win situation, where you can not only purchase the business but also potentially offer tax advantages or a deal structure that benefits the seller in the long run.
2. Don’t Be Afraid to Ask for What You Want
Allchin stresses the importance of asking for favorable terms. “The worst that can happen is they say no,” he says. “I bought a chicken shop years ago for no money down, and it turned into a profitable business. You never know unless you ask.”
Allchin encourages aspiring business owners to push for deals that work in their favor. “Ask for the terms you want, and you might be surprised by the outcome,” he adds.
3. Ensure the Business Is Profitable Enough
Before making a purchase, Allchin advises doing thorough due diligence to ensure the business is profitable enough to support management and scaling. “If the business doesn’t generate enough cash flow to pay for management and growth, then it’s not a successful acquisition,” he warns. “You’re just buying yourself a job.”
He suggests focusing on businesses that make at least $500,000 in profit. “That’s my rule of thumb,” he says. “Anything less, and you’ll be stuck doing all the work yourself. A business that’s truly worth buying should have enough cash flow to scale and allow you to step back from daily operations.”
The Future of Business Acquisitions
With millions of small businesses on the market—especially as many baby boomers approach retirement—there has never been a better time to consider acquiring an existing business. “There’s a tsunami of businesses coming up for sale because the owners are retiring, and their kids don’t want the business,” Allchin explains. “This creates a huge opportunity for people who are looking to buy a business instead of starting one from scratch.”
Chris Allchin’s experience proves that buying an existing business can often offer a faster, safer, and more profitable path to success than starting one from scratch. With the right strategy and a clear understanding of what makes a business worth acquiring, aspiring entrepreneurs can take advantage of a wealth of opportunities in today’s market. To connect with Chris, visit his LinkedIn page or website.
Written in partnership with Tom White
