Buying an Existing Business vs. Starting a New One

Buying an Existing Business vs. Starting a New One

You may have heard the expression “there’s more than one way to skin a cat” — meaning, of course, there’s more than one way to accomplish a goal. As it turns out, this maxim holds true for running a small business.

While some entrepreneurs elect to build a business from the ground up, yet others go the route of purchasing an existing business and making it their own. It’s not that one is better than the other; it’s just that these two avenues to operating a small business offer unique sets of advantages and disadvantages.

Here’s more on the ins and outs of taking over an existing business versus starting your own. 

Pros of Buying an Existing Business

Businesses of all sizes and niches go up for sale for a variety of reason — providing opportunities for entrepreneurs to take the helm moving forward, for a price. Pros include:

Existing businesses have “traction”

As one expert writes for Inc., one of the most tempting aspects of buying an existing organization is the fact it will already have “established traction.” This is true in a few key areas: revenue, operational logistics, customer base, vendor/supplier relationships, brand awareness and more.

This is not to say you won’t have to work hard — quite the opposite — but rather that you won’t have to expend so much effort and devote so many funds to getting the business off the ground. It’s already there; your job is to make it better. 

You can avoid many start-up costs

In a similar vein, the existence of a business implies that many of the initial start-up investments have been made. Seeing as it can cost thousands to start even the smallest business, this is where it can be financially savvy to take over an existing company rather than start from zero.

Pros of Starting a New Business from Scratch

Now, what are the potential advantages of bringing a brand-new business into the world?

You get creative control

Starting your own business gives you creative control over everything from buying a business name to setting your product lineup to designing your company website. This approach gives you more ample opportunity to control every early decision pertaining to the formation of your company.

You can come up with a completely unique name and logo as part of your brand’s personality — an appealing choice for owners who want to feel a personal stake in their organization from the get-go. Of course, if you buy a business you can always do a rebrand, but it’s a different endeavor than creating a new entity. 

You control decision-making from day one

Branding, operations, marketing, customer service, location and inventory are all yours to dictate. Rather than reacting to a string of someone else’s decisions, as you would if you bought their business, you’ll be forging your own path. This gives you immense license but also comes with significant responsibility.

You won’t start with any “baggage”

Launching a new enterprise means you’ll be able to operate without worrying you’ve bought a business that has “baggage,” or potential negative associations to overcome. For instance, someone who buys a restaurant with a lot of negative Yelp reviews will have to work harder to gain the trust of diners who have had less-than-stellar experiences in the past; someone starting a new restaurant will get a chance to “wow” customers from the start and forge their own initial associations. Of course, the reverse is true too: Established businesses usually have a fan base, while new businesses have to work hard to earn every single sale.

There are convincing reasons to consider buying an existing business and starting your own. Only you can decide what is the better path for you based on your priorities.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.