Buy a Business or start a new one?

One of the most common questions people ask themselves is whether it is better to buy a business in Tenerife, or start a new one from scratch. The reason why most people start a new business rather than buy a Tenerife business for sale is because they think that this is the cheaper option, and therefore lower risk. But is this really the case?

Many new entrepreneurs come from countries like the UK, Germany or Switzerland where you can have an idea one day and be trading from new premises with a limited company the next. Do not expect to do this in Tenerife!

Starting up a new business in Tenerife is much more complicated, and you certainly won’t be in a position to start earning money for several months. In order to set up and trade legally, you will need to fight through the bureaucratic red tape. Licenses and local laws are only the start. You’ll need to find tradesmen, decorate and equip your new business to the legal standards.

Even if you speak fluent Spanish, starting up is no easy task.

No one who has been through the process of starting a legally trading business in Tenerife will tell you that it was as easy as they thought, or as cheap. And they will all tell you it took much longer than they thought. There’s lots of spending to be done on putting your business together during these months and all the while you will not be earning an income. You’ll find your capital whittles away rapidly during this time.

When you are finally able to open your doors for business, you’ll need to find suppliers, organise deliveries and spend marketing money on letting people know you are there. It might feel like the end of a journey, but this will be just the beginning. You’ll make mistakes, waste time and probably waste money too.

It can take a long while for a business to really get established, which is why most new businesses in any country will go bust in the first two years. Tenerife is no different. The difference in Tenerife is that the barriers to starting a new business are higher and costlier than most other places.

On the other hand, taking over an existing business brings some substantial advantages. When you buy an existing business, the price you pay will include everything you need to run it. Licenses, contracts and all the paperwork will be in place and you should be able to slip into running the business fairly seamlessly. The next day, you will be earning money.

Clearly, the risks are much lower in purchasing an existing business. But when you do the sums, you may be surprised to discover that the costs can be lower as well. The recession has forced down the price of the average Tenerife business for sale, while ironically the cost of setting one up has become greater.

Combine this with the fact that existing businesses already occupy the best locations and the case for a new start up becomes a weak one. In most cases, those who wish to start a new business in Tenerife will take a pragmatic decision and buy an existing business that is already trading. After settling in, they will then begin a process of change and improvement that will ultimately result in a business they can truly call their own.