Buying A Business vs Starting Your Own: Which Is Better


You’ve decided that you want to run your own business, but should you buy an existing business or start your own? Both have their benefits and drawbacks – it really depends on what type of person you are and what your circumstances are like.

Below are just some of the things to consider when making the decision to buy a business or launch a start-up.

Getting funding

Buying a business is often a lot more expensive than starting a business from scratch. With a start-up, it’s possible to work within a tight budget by starting as basic as possible and then building from there. For instance, if you’ve got your heart set on owning a physical clothes store, you may be able to start with an online store or even a market stall, build a profit and then eventually afford physical premises.

Businesses for sale tend to be well-established and may be priced at two or three times their annual revenue. This makes them a much bigger investment. While it’s possible to start a business without acquiring extra funding, buying a business without extra funding is impossible for many people.

That said, it’s often easier to find funding to buy a business than it is to start a business. Banks view start-ups as a riskier venture and tend to give out loans more sparingly, while investors are likely to want a thorough business plan from you before parting with funding a start-up. Existing businesses have a proven track record to show that they can make profit – bankers and investors are therefore more willing to offer funding in the knowledge that they are more likely to make a return.

Assessing the risks

On the whole, start-ups tend to be a riskier investment than buying a business. While some people choose to buy failing businesses with the help of turning them around, most people buy businesses that are already successful. As a result, you’re buying into a business model that you know already works and are able to rely on a steady income. 

When launching a start-up, you have to discover that secret formula that will make your business successful. This could involve a lot of trial and error and your income could be a lot less predictable at the start. A lot of people aren’t willing to take this risk.

Franchises tend to be the least risky option. Not only are you buying into a well-known and trusted brand, but you’re likely to still get some protection from the franchise owner as if you were working for an employer. It’s also easier to find available businesses within your niche – if you’re looking for a movers business for sale, you could find that many businesses openly advertise these. Independent businesses for sale may not be advertised openly in such a way. 

Thorough research can help in both cases, whether you’re starting a business or buying a business. When it comes to launching a start-up, spend time doing a lot of market research including consumer surveys and competitor analysis. When buying a business, spend time shopping around to find the right business.

Understanding your creative limits

When starting a business from the ground up, you have full creative control over every aspect of your business. This appeals to many budding entrepreneurs who may have precise plans as to what they want their ideal business to look like. Every business owner is still bound by certain rules and it’s always beneficial to seek out some advice from others, but on the whole there’s little holding you back from creating a business in your very own vision.

When you buy a business, everything has already been created for you. You have the freedom to make changes, but you need to be certain that existing customers and employees are happy with these alterations. The previous owner may even make you sign an agreement preventing you from dismissing staff members or making certain changes for a period of time. A franchise is likely to come with even less freedom as you’re having to follow a business model and promote a brand owned by someone else. Of course, certain people may prefer this.

How long will it take to get started?

Both starting a business and buying a business can be a lengthy process. Generally speaking, it’s easier to start a business quickly – if you’re keen, you can apply for a loan and launch your business within a week (although it’s beneficial to take more time than this). Buying a business is a process that can take months. Not only do you have to find a suitable business that is for sale and get your offer accepted, but you also have to go through the transition process which generally involves slowly taking on responsibility from the previous owner (this time is also important for getting acquainted with the team and educating yourself on how the business is run). 

Of course, once you’ve bought the business and it is yours, everything will be set up for you. Starting a business can take months or even years of getting things established before reaching a stable point in which you have enough clients and all the right gear. This is something to consider when thinking long-term – are you able to cope with an uncertain income for several years or do you need a stable income as soon as possible? 

So which is better?

Some people are better suited to starting their own business while others are more likely to thrive when buying a business. You need to work out what is the best option for you.

Signs you should buy a business

Buying a business is better suited to those that want a secure investment without full creative responsibility. You get to be your own boss while being able to rely on a successful framework that someone else has already established for you. The process of buying a business may be long, but you’re guaranteed a stable income at the end of it. It’s ideal for those that don’t want the hassle of building a business from the ground up. Just be prepared to spend more upfront. 

Signs you should start your own business

Starting a business from scratch is better suited to those that like taking risks and implementing their own ideas. Buying an existing business may seem too restrictive for some people – when you start a business you get to decide everything from the name to the location to who your customer base is. It can be a long struggle to get your business to a successful stage and you need to be the type of person that’s not phased by this. If you don’t want to take out a large loan or seek investment, starting a business may also be possible on a smaller budget (although it depends very much on the nature of the business).