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Buying a Business vs Starting One Up

November 11, 2018

Becoming your own boss can be a very exciting prospect. But when it comes to deciding how exactly you ought to take up the reins of a business, you could be stumped. After all, there will still be risks – albeit different ones – whether you form your own business or buying a business.

However, by weighing up the different merits and drawbacks of each route, you might find that one would be noticeably more suited to you. You should particularly strongly consider…

Financial risks

Setting up a business is financially riskier than buying one. Attempting to get a new business off the ground could test you in various unexpected ways. Whereas when buying a business, you are inheriting a corporate model that has already been tried and tested.

You will need to pour much more starting capital into a business purchase compared to the start-up option. But an established firm’s consistent turnover could hold you in better stead over time.

Profit

Another drawback of starting a company is that, for a while, you could struggle to amass significant financial returns on your initial investment. Patience is very much the name of the game, so ask yourself whether you are patient enough to weather the early storms.

However, buying a company means getting an immediate revenue stream. You can also confidently expect that stream to be consistent for a while. This is providing that you don’t overly disrupt the existing business model. It’s probable that the firm will have already gathered a high tally of repeat customers.

Creativity

If you love the idea of tailoring and tinkering with branding, you might be salivating at the idea of starting your own business. So having a blank canvas with which you can run riot.

However, it is exactly the huge amount of freedom possible with a start-up which can doom it to failure. There is more scope for things to go wrong. Besides, with a ready-made brand, you could still make subtle changes over time. You can do this without risking inflicting lasting harm to a winning formula.

Trust with customers or clients

It’s human nature to be wary of change. This certainly applies to the customers or clients of a business which you would buy. They might be concerned that, as you take over, you might be intent on making dramatic, sweeping changes that leave these people inconvenienced.

For this reason, it would be wise to avoid making any major changes to the company during your first 12 months at the helm. This will give customers time to get used to seeing you as the new boss. They wouldn’t be left feeling like they are getting an unwelcome push out of their comfort zone.

Naturally, you wouldn’t have to worry about a ready-made customer base if you start a company from scratch. However, as a company can’t sustain itself without custom, you would need to invest effort into attracting customers.

Succeeding in both developing that customer base and inspiring loyalty from it can be easier said than done. It can rely on a significant amount of business acumen, making buying a firm potentially a safer bet.

Trust with employees

As you snap up a business, you will also effectively buy its existing employees. However, winning over the trust of these people can be a very different matter to earning trust with customers.

The problem here is that, ultimately, these employees will initially see you as an outsider. This could be especially problematic if the company has recently been through hard times – as, indeed, might even be a reason why the previous owner decided to offload the company.

Therefore, the employees might be uncertain about whether you can really turn things around. You can reassure them by very openly telling them about your plans for the company.

If you decide to start your own company instead, this would give you a lot of freedom over which people you recruit. However, whether those people would, as employees, be as appealing as workers you inherit through buying a company can be a very different question.

Your past business experience

If you are preparing to enter an industry with which you have little experience, you would be on relatively safe ground if you bought a business that is reliable in turnover and structured in procedures. A firm started from scratch could falter if your relevant business knowledge is lacking.

Furthermore, by purchasing a business, you would also pick up experienced employees who don’t need to be, on your initiative, trained or made familiar with the company’s inner workings.

Due diligence

A particular business might look promising, but why is it up for sale in the first place? This is why you need to ensure that proper “due diligence”, to use the appropriate term, is carried out. This process can shine light on underlying issues with the company.

If you uncover problems through assessing that company’s financial statements with legal assistance at hand, you could more easily assess where the firm’s value really lies.

You wouldn’t have to fret about any of these issues when you are the boss right from the beginning. Still, keep in mind that we can ease your acquisition of a promising company, not least due to our comprehensive directory of informative listings for various businesses that are currently for sale.