Have you ever dreamt of owning your business and going down the path of entrepreneurship? Most people assume that starting a business means coming up with a new and unique concept, then building it from the ground up. However, that is not the only way to get started. You can buy a business that already has traction and has been through the early onset of starting a business from scratch. However, it is not as easy as making the purchase, laying back and collecting the revenue. The truth is, when it comes to debating on buying a business vs starting a business, there is no right or wrong answer. Hence, we have outlined the pros and cons of buying a business vs starting a business below.
Buying a Business: Pros & Cons
Before you seriously start to consider owning a business, there are many factors that come into play. Regardless, only you can weigh out each and decide if buying a business is the avenue you want to take. Below outlines a few pros and cons you need to consider when it comes to buying a business.
Pros of Buying a Business
One advantage of buying a business vs starting a business is that the business is already established and known by people, meaning that there is likely a loyal customer base already present. Marketing strategies may already be set up. This works in your favour as it will give you leverage on growth potential compared with starting a business, since you will most likely need lots of money to invest in marketing the business to gain attention and exposure.
If you decide to buy an existing business, you are bound to save some time in the early stages of business ownership. Looking for real estate, hiring employees, researching and acquiring equipment takes time. Fortunately, in this case, those decisions have already been made for you. You will surely make changes along the way, but at least you will have a solid foundation to hit the ground running.
Easier to Get Financing
If there is one thing all banks love to see, it is minimal risk when providing a business owner financing. By having an established business, the banks can see the financials and get an idea of whether you will be able to repay any business loans you open. When starting a business, it can be pretty common for a bank to deny a request for a loan.
Cons of Buying a Business
Diving into a Sinking Market
Regardless of whether you are buying a business or starting it from scratch, you should be familiar with the competition and landscape of your market. You need to consider if the market as a whole is showing growth, or if it is slowly dying. At times, businesses are sold because they were not doing well or there is no longer a market for their products or services. If it looks like the market is heading in a downward spiral, you need to consider if it is in your best interest to buy a potentially sinking ship.
Taking on the Business’s Problems
When you buy an existing business, any issues that it has is now your responsibility. You need to be aware of any potential hidden problems that may arise with time. There is a chance that you may take on all the debt and issues that unravel before your ownership. It is important that you understand all of this information in advance so that you do not have any surprises waiting for you after signing on the dotted line.
After taking on the business, there is a possibility that you may need to let people go and hire new staff, which takes time and can impact the work culture. Therefore, you need to see how the employees are at the business. You need to know if they are hardworking or lazy, whether they are happy or irritated about a potential new boss. And if they will be on board with any changes you make. You need to quickly determine who your leaders are and who is holding the business back.
Starting a Business: Pros & Cons
Now that we have discussed the pros and cons of buying a business, we will now cover the same for starting a business from scratch…
Pros of Starting a Business
You Get to Build Your Dream
There is nothing better than being able to start your dream from scratch and seeing it through to the end. Unlike buying a business, starting a business lets you build the foundation of your business however you want. You have a blank canvas that you can paint with whatever colour and use whatever tools you deem necessary. Furthermore, you get the satisfaction of knowing you took the idea (one that you had and not someone else’s) and build upon it. Sure, buying a business also allows you to change many things, but that takes time and money. In the end, there is no limit with what you can do right from the start. At times, this is easier than trying to change things at an already established business that has existed for years.
Flexible Work-Life Balance
This will ultimately depend on what style of work you will be doing and what your priorities are. You get to work on your own terms. You will choose your working hours, where you will do the work and the pace at which you will work right from the start. At times, building your business may take centre stage for a while, and it might take a few years before you feel comfortable about stepping away from the business without being terrified that it will fall apart immediately.
Create Your Own Dream Team
Starting your own business means that you have the power to hire whomever you want. This is very different from buying a business since you get the employees that come with it. When you are starting from scratch, you can interview multiple candidates and choose the right one for the job. From there, you can build your own work culture from the ground up instead of adopting one that may not align with your core values and ethics.
Cons of Starting a Business
There are no guarantees in business, and when things go south, it is not easy to just quit and move on to the next job. There is a genuine possibility that your business may not work in its first iteration, and you will have to shoulder the risks associated with this. And they will not just be financial risks either. You will potentially be risking things far greater than money. Most entrepreneurs struggle with juggling aspects of their personal relationships, physical and mental health as their business becomes consuming.
No matter which road you take to become a business owner, there will always be a lot of new responsibilities on your plate. Starting a new business means you are making every decision, all of which will affect your business and its success. The decisions you make are final, and any consequences will come back to you. You will not always make the right decision, and that is okay. You are going to have to learn to just make peace with that. Some people adore the challenge, while some see it as a disadvantage of a start-up business.
Infrequent Pay Consistency
When you are a new business owner, there is a real possibility that you could go without pay for the first three years of business. You can not depend on a set wage and a set pay day. If your business were to take a hit, it will have an impact on your personal finances, and you will not know when this may happen or when it will pick up. That being said, do not let that deter you from starting a business. Some businesses grow quickly and provide lucrative benefits to the owner, as there will be no cap on your earnings if your business does well. In the end, it truly depends on how the business is received and if it receives the attention it needs.
Buying a Business vs Starting a Business: Which one is for you?
So which is the best decision for you? Whether you are buying a business or starting a new one, there is a lot to consider. Both bring high risk, high costs and a high level of difficulty to succeed. In the end, it all depends on a couple of critical considerations. If you have a business idea that no one has built, or there is a gap in the market that you think can be capitalised on. Then go for it: register your business and get to work.
When considering buying a business vs starting a business, the decision could ultimately come down to a business opportunity. While this does not happen often, sometimes luck is on your side. That being said, for the right price, someone may consider an exit and be willing to sell you their business.
If you have a vision for a business but someone else has already capitalised on it, do some research. Find out if the business is doing well or if it is burning money each month. Either way, find the reasons for both scenarios. In the end, should you decide to buy an existing business, ask to see their financials. This will provide you with an idea of how successful and profitable you may or may not be, should you decide to buy.
There is No Wrong Decision
When debating between buying a business vs starting a business, try not to dwell on which is better. The truth is, there are pros and cons to both, and there is no right or wrong answer. Ultimately, it all boils down to your situation and individual needs. Make sure you take your time to ensure you make a decision based on all of the information you have gathered. It is never a good idea to make decisions quickly or without looking at things from all angles.
And don’t forget – you do not have to go at it alone, whether you decided to buy a business or start one. Our team at BUSINESSNAV is here to help. Contact us today; our tools, resources and expertise can help guide you into the next step of your business journey.
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