Small Business Spotlight: This Wine Store Owner Got Started by Buying an Existing Business

Often when people think about entrepreneurship, the focus is on starting a new business from scratch. But sometimes the best way to "start" a business is to buy a business. Buying an existing business can be a great way for entrepreneurs to get a foot in the door.

There are a few advantages to buying a small business. Existing businesses tend to have an established brand, customer base, and business model. Ideally the business is already profitable, but new ownership can give it a better direction and a new burst of momentum.

Tim Delaney is the owner of Elma Wine & Liquor, which sells online (elmaliquor.com) and in-person from its brick-and-mortar location in Elma, New York. Tim is a passionate serial entrepreneur who also owns a software startup, a consulting firm, and a portfolio of real estate.

We interviewed Tim about his experience buying a small business, and why acquiring existing companies could be a great strategy for other entrepreneurs.

Lessons from buying a wine store

Elma Wine & Liquor has been in business for 60 years -- but Tim Delaney didn't start it, he bought it. The store has been under Tim's ownership for the past 10 years, and he's led it into a new era of expansion and growth.

Tim used a combination of bank financing and seller financing to buy the business. That's something that a lot of would-be small business buyers should keep in mind: you don't always have to pay cash or get a bank loan or Small Business Administration (SBA) loan to buy a business. There are often flexible options to finance the deal, and former owners can assist you with financing.

Business owners often get to a point where they want to retire, and selling their business is their best chance to cash in on their life's work. Seller financing can be a win-win because it helps the business buyer complete the acquisition and change ownership, and the business seller gets a stream of income from the buyer's future loan payments.

A successful small business, just like a nice house in a great location, is a valuable asset -- and seller financing lets you borrow against that value. Even if you can't get an SBA loan (which can be hard to get for acquiring businesses), if you have some capital of your own to invest, and you can work with the seller to find some financing options, there are various ways to make the deal happen.

How buying a small business created big financial success

By purchasing an existing business with the help of bank and seller financing, Tim Delaney was able to turn a relatively small investment of his own cash into a much larger success story. "I made an investment of $35,000 ten years ago and now I own a cash flowing asset worth over a million dollars," Tim Delaney said. "The first couple years involved long hours and lots of sacrifice of personal time. But I think there is so much untapped potential in the idea of buying a small business, and I am a huge advocate for people to look into buying an existing business."

Buying a small business can be like buying a house that gradually pays for itself. You need to take out a "mortgage" (bank loan/seller financing loan), but then the business creates its own "mortgage payments" (business income). If you have a solid business plan, you might even find that buying an existing small business can help you achieve big profits and growth even faster than if you had built a business from scratch.

In some ways, buying an existing business can be less risky than starting your own -- and can still deliver significant return on investment. Tim saw this happen for Elma Wine & Liquor after he bought the business. He made the company grow in value, while using the profits to pay down the debt from the purchase agreement. Over time, increasing the business's value and reducing debt has led to increased equity, and a higher net worth for Tim.

Small business ownership: Building wealth, creating opportunities, serving the community

Tim Delaney is a longtime entrepreneur who always wanted to be his own boss. But he has also found a great sense of purpose in seeing how his small business serves his community and creates career opportunities for his employees.

"Small businesses really are the drivers and heartbeat of our communities," Tim Delaney said. "Personally I have learned the importance of treating every customer and employee with respect. Over the years of growing the business and building systems to help run it, I've been able to provide even more lucrative management jobs to my staff."

Brick-and-mortar retailers often become their own little hubs of community activity. Elma Wine & Liquor serves that role for the town of Elma, New York, bringing people the joy of a well-chosen bottle of wine. "We strive to provide top notch customer service and offer a mix of tried and true big brands while introducing our customers to unique and different products from around the world," Tim Delaney said. "One of the funniest things that has happened over the years is people thinking that one of my employees was my mother and another my son."

Tim Delaney's success story with Elma Wine & Liquor is a great example of how you don't always have to start a business to be an entrepreneur. Sometimes the best path is to buy an existing business -- and lead it to a new level of growth.

For more about Tim Delaney, check out his website, powerofbiz.com -- he is available for speaking engagements and podcast appearances.