Starting Your Own Business vs Buying

Every business aims for income and profit and more individuals are willing to engage commerce. But the big question is whether or not to “start a business” or “buy an existing one”.

Before deciding on what strategy to choose, let us first review the positives and negatives associated with both

Starting a business from nothing

Establishing a new business is basically the creation of it starting from scratch. Initiating one involves serious work. It requires an idea for the creation of a unique product or services, a business and marketing plan that will be easily accepted by the market and long hours of research are needed to come up with an original business concept.

Many people fear that when they start their business it will not prosper, or more plainly they fear failure.

It involves a number of risks compared to buying one. Further, studies show that many new businesses fail within the first three years.

Starting a business can be difficult and time consuming; you don’t really know who your target customers are, how many employees you will need; you don’t even have an idea whether or not the business will be successful.

Business buying

Purchasing an existing business is quite costly compared to starting one. Despite the cost, many entrepreneurs consider purchasing an existing business as a less risky option than starting one. It can save you a lot of time and energy and is known to have a lesser risk of failure. Buying has grown in popularity for most entrepreneurs and it is said to be easier since all the complex work has already been done for you.

To help you choose, here are some of the advantages and disadvantages of each strategy:

Starting a business of your own

Disadvantages

1. You need to do everything by yourself including creation of a business plan, business name, promotion and advertising.

2. Attracting customers may take more time since there are no established customers yet.

3. Months and even years of insufficient income and slow sales.

4. Financing can also be difficult since most lenders prefer to provide loans to already established businesses.

Advantages

5. Autonomy – You have the independence to make your own decisions.

6. Develop creativity – You will have the freedom to be innovative and creative.

Buying an existing business

     Advantages

1. Established solid customer relationship
2. Verified business methods and concepts
3. Qualified and trained employees
4. Proven cash flow
5. Established supplier relationship
6. Established infrastructure
7. Goodwill included with the business
8. Lenders are willing to finance a loan to an existing business

Disadvantages

1. Staffing problems – new owner versus existing owner can breed distrust
2. Customers loyalty to former owner
3. Goodwill acquisition may be too expensive
4. Obsolete and defective plant and equipment
5. Previous owner may become a competitor by putting up another same type of business. This can be addressed with a non-compete clause in the sales contract.

As you can see the advantages of buying an existing business prevail over its disadvantages.  Compare this to starting your own business where the detriments outweigh the benefits. Still it’s up to you to choose the right strategy that you think is best in your case.