Buying a Business vs Starting One: Which Is Better?

Eric Siu

In the dynamic world of entrepreneurship, a pressing question often arises: Which is better, buying a business vs starting one?

Having navigated both terrains, I’d like to share some insights on the pros and cons of each approach. Let’s take a look at the key points to consider.

Yaniv Masjedi

CMO, Nextiva

Their expertise has helped Nextiva grow its brand and overall business

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Key Considerations When Buying a Business

The business landscape is filled with voices opining on the advantages of buying existing business, from local laundromats to niche online stores. But is this strategy suitable for everyone?

There are valid arguments on both sides.

Before diving into an acquisition, it’s crucial to evaluate your background and determine which type of entrepreneur you are. The most important thing to consider when considering a purchase is: Do you have any operating experience? This can significantly influence your success trajectory.

Pros of buying a business:

Ready-made customer base
Established products or services
Potential synergies with other projects
Lower risk compared to starting anew

A sobering fact to keep in mind is that most new businesses don’t see their sixth anniversary. So acquiring an established entity (including franchises) can, in some cases, sidestep this pitfall.

An advantage of buying an existing business is that there is the potential for reduced risk. With so many startups folding in their early years, stepping into an established operation can offer a safety net.

However, buying isn’t a walk in the park.

Cons of buying a business:

Merging with existing operations can be tricky
Hidden debts or liabilities might emerge
There’s always the risk of paying more than the business’s worth

While buying might seem straightforward, it’s filled with potential pitfalls. Integration, especially, can be more challenging than the purchase itself.

So a fundamental question to ask yourself before any business acquisition: Is this where your passion lies? Is the venture purely for financial gain, or is there genuine interest?

Key Considerations When Building a Business

Building a business from the ground up is a monumental endeavor, one that requires meticulous planning, unwavering commitment and a clear vision of business growth. Before embarking on this entrepreneurial journey, it’s crucial to understand the landscape and the challenges that lie ahead.

One of the first considerations is the market demand. Is there a genuine need for the product or service you’re offering, and how does it differentiate from existing solutions?

Additionally, financial planning cannot be overlooked. Ensuring that you have adequate capital to sustain the business through its initial phases where profits might be elusive is paramount.

Building a strong foundation is essential. This includes crafting a robust business plan, assembling a dedicated team and establishing a brand identity that resonates with your target audience. Each of these elements is a huge task in itself and plays a pivotal role in the long-term success and sustainability of your venture.

So what is a benefit of starting a new business from scratch?

Pros of building a business:

Creative freedom to shape your vision without constraints
No legacy issues.
Personal growth and invaluable learning experiences
Full equity control

Embarking on a new venture allows for unparalleled creativity and control. However, it’s not without its hurdles.

Cons of building a business:

It’s a test of patience
It’s very time consuming
Has a high failure rate
Requires significant risk tolerance

Remember, starting a business is a marathon, not a sprint. It typically takes about three years to build anything decent, or at least start to get some traction, and the initial phase is fraught with challenges.

Last Word on Navigating the Business Landscape

The question ‘should I buy a business or start one’ is more than just a financial or strategic choice; it’s a deeply personal journey that aligns with one’s vision, passion and long-term goals.

Both paths come with their unique challenges and rewards. Buying offers a springboard into an established framework, while building allows for a canvas of pure creation and innovation.

Ultimately, the best choice hinges on your individual strengths, risk tolerance and where you see yourself in the entrepreneurial narrative. Remember, success in business isn’t solely determined just by the starting or ending point, but by the dedication, adaptability and resilience you bring to the journey.