Are you feeling a desire for something new? As you embark on your entrepreneurial journey, you have two options: Start a brand-new business or acquire an existing one. Both choices have important factors, pros and cons to keep in mind before taking the leap.
Explore key considerations for buying vs. starting a business to determine which avenue is right for you.
Considerations for Starting a Business
Laying the groundwork for a new business takes significant perseverance and dedication to achieve success, but it can be very rewarding. Weighing the pros and cons can help you assess whether or not becoming a founder is the right move.
Pros of Starting a Business
Launching a business from the ground up can have several advantages:
Full control: Building a business from scratch means you have full control over the vision and operations. You can set up your infrastructure exactly how you want it. The founder has complete say over the brand and its mission.
Creativity: Starting a business gives you the opportunity to flex your creative freedom. You can disrupt an industry by developing a fresh, new approach to the products or services you offer and instilling innovation every step of the way.
Flexibility: When starting a company, you can easily change and adapt your business model as you learn and your operations grow. In some cases, you may also have financial flexibility if your initial investments are low.
Personal satisfaction: Starting with an idea and building a tangible business is impressive! The process of establishing a brand and company, while often demanding, can be extremely satisfying and fulfilling.
Cons of Starting a Business
While there are some advantages to starting a business, entrepreneurs should always be cautious when pursuing a new endeavor. Some of the potential drawbacks of building a brand-new enterprise include:
Risk and uncertainty: Starting a successful company is tough. In fact, half of new businesses will fail after just five years, and about 65% will stop operations before their 10th year. Success is never guaranteed, and getting a new enterprise off the ground depends on many factors, including market conditions, demand and competition.
Time and effort: Launching a business requires a massive time commitment. The early stages are especially time- and effort-intensive as you work to establish an internal infrastructure, get the help you need and acquire paying customers.
Generating revenue: Not all businesses will generate revenue at the beginning. It can take time — sometimes years — to turn a consistent profit.
Brand awareness: When beginning a new company, you need to invest in building brand awareness, credibility and a positive reputation. This process requires time, money, energy and marketing expertise.
Overall, starting a business is a huge undertaking, and you have to be ready to dedicate a lot of yourself to the company’s success to keep operations running.
Considerations for Buying a Franchise or Existing Business
When comparing buying a business versus starting a business, the former tends to be the favorable option. A few considerations can help you assess if acquiring an existing company is the best path for achieving your goals.
Pros of Buying a Business
There are many advantages to buying an existing business instead of starting one from scratch, such as:
Existing cash flow: Buyers can invest in established businesses that are actively generating income. This means you will have revenue to work with from the beginning of ownership rather than striving toward turning a profit the way you would if you were just beginning a company.
Brand recognition: Existing businesses have an established customer base and reputation. You can benefit from the company’s recognizable brand name and equity.
Established infrastructure: A company that’s already operational has existing processes and systems in place. Buyers can focus on refining and improving operations rather than investing significant time and energy in establishing them.
Less risk: Acquiring a business can have a lower risk compared to launching a startup. You are working with a proven business model, existing customer base and greater insight into the current market for your products and services. There is a less significant learning curve, and you can consult with the previous owner and employees for valuable insight into operational best practices.
Financing: Securing financing for a company that is already operational is easier than trying to prove to lenders that your business has the potential to thrive with their monetary help.
Buying an existing business can streamline your entrepreneurial journey, saving you time and energy that can go toward making your brand a success.
Cons of Buying a Business
Acquiring a franchise or business can be extremely advantageous. Before diving into the buying process, every potential buyer should be aware of a few factors:
Upfront purchase price: Buying an existing business can be expensive. You’ll want to work closely with trusted partners who can help negotiate a fair price.
Employee retention: Some workers may leave after an acquisition. To manage retention rates and support a smooth shift in ownership, prioritize open and transparent communication with existing staff.
Transitioning ownership: Ensure you have a good relationship with the seller before buying. They should be cooperative, honest and willing to answer your questions for a successful and easy transition of ownership.
Navigating the Business Acquisition Process
Prospective buyers can streamline the business acquisition process with a few best practices:
Identify your passion and expertise: Running a business can be demanding but extremely rewarding if you love what you do. Before buying, consider your strengths, interests and expertise. Choose an industry and mission you feel passionate and knowledgeable about.
Evaluate market conditions: Learn more about the market conditions, consumer demand and competition in your industry to ensure you choose a company with viable growth.
Assess businesses for sale: Choose the geographic region where you would like to have your business and find options currently for sale within your industry. Research the companies you are interested in to learn about their internal infrastructure, why they are for sale and their existing customer base.
Do your due diligence: An expert can help with financial and legal due diligence as well as ensure an accurate asset valuation for the most advantageous deal.
Find Businesses for Sale in Your Area
If you’re looking to acquire a business, turn to Synergy Business Brokers. Our network of local and national contacts, expert negotiators and award-winning salespeople enables us to bring the right sellers and buyers together.
Synergy Business Brokers makes finding the right company to buy easy. We have a growing list of businesses for sale in a wide range of industries, from construction to health care to manufacturing.
