Buying vs. Starting a Business: Which Is Better?

Did you know that 20% of businesses fail within the first two years of opening? For many people, this makes buying an existing business a much more attractive proposition. But how do you know if it is the right move for you?

Startups and existing companies all have pros and cons. Read on as we decide between buying and starting a business to see which is better for you. 

Passion for the Product

When you have a great idea for a product or service, you may need to start a business to get it going. A business that already exists to provide that product may not already exist. If they do, they may not be for sale, leaving you with only one option. 

In contrast, if you have skills, experience, and expertise in a field or industry, then buying a business can be a great idea. An existing business will already have something to sell. All you need to do is see what they already do and improve the business by increasing profit. 

Brand and Customer Base

When you buy an existing business, they will already have worked on building a brand. They may have done marketing campaigns, built a website, started social media pages, and gained followers. All of this translates to a customer base that already exists and is making purchases.

With a new business, all of these relationships have to be created and won. Most people will already have affiliations and loyalty to brands and companies in a similar niche. You have to work hard to offer them something more and employ marketing to let them know about it. 

This means that when you start out with a new business, you need to go hard on the marketing efforts. This may cost a lot of money at a time when income is slow. With an established brand, marketing channels, advertising methods, and customers will already exist. 

Funding

When you try to secure funding with a new business, you are essentially making an educated guess at your success and your profit. You can back it up with market research and get your figures and projections accurate. However, there is still an element of estimation involved. 

All of this can make it harder to secure funding. A lender has to look at your figures, your suggested desire for the business on the market and decide if they will reclaim their investment. This is why it can be very hard to get new business funding. 

When you buy an old business, they can look at past financial statements. They can see where profit comes in and how they would be able to reclaim their money. Even if the business is not making as much profit as they could, telling them how the money will impact sales at least gives them something concrete to view. 

Startup Time

When buying a business, the startup has already been done. With the product, stock, processes, and customer base already intact, you just need to learn the current method of working and improve on it. 

In contrast, a new business has a long startup time. You will need to forge relationships with customers and suppliers. Staff needs to be trained. Systems have to be put in place. 

However, it also has its advantages. You can shape the business and mold it how you like. 

You may have certain goals you want to achieve or specific ways in which things should be done. These can be put in place from day one. 

With an existing business, while you get to skip this process, you don't get to shape the company in this way. It may cause conflict, and you may even lose customers if your changes are vastly different. 

Staffing

One big hurdle you will have to face when you buy an old business is the staff. If you are lucky, they will be hardworking and willing to accept change. At the worst, they could be lazy and averse to new ideas, especially those from a new boss.

Your changes may also mean that some staff becomes redundant. In both instances, this means you have the tough task of removing staff who no longer fit the business model. This can be emotionally draining and cost money. 

With a new business, this is not an issue. You are recruiting from the ground up. You can pick and choose the staff you need and only select the ones who fit your business and its outlook. 

Taking On Existing Problems

Occasionally, someone may sell a business when it is at its prime. This ensures they get the best amount possible for it. However, in the world of buying businesses, you get what you pay for. 

Very often, people sell businesses for two reasons. The first is that they are tired of the industry or want to move onto new ventures. This inevitably means that they take their foot off the accelerator in the run-up to a sale, something you have to make up for. 

The other reason is that the business was not doing well when they sold it. Thus, you may have to turn around a business. You may have to revive its fortunes with a bad reputation or in a failing market and sort a multitude of problems. 

When starting a business, you still have a huge degree of problem-solving. However, you are building a company instead of changing one. For some people, this can be much easier. 

Starting a Business vs. Buying One

In summary, if you have a new product, service, or idea, then starting a business is a better idea. However, if you have experience in business or a given industry, then buying may be better for you. 

If you are looking to purchase a business, then Biznexus should be your first stop.

We have everything to help you locate and acquire the ideal company. We make it easy to find a business for sale by creating a login and taking the first step toward business success. 

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