Going into Business: Buying In vs. Starting Up
If you’ve got a passion for business and want to own a company, you’re on the right track for the adventure of a lifetime. There are several ways to get started, but they’re not always clear, and which is right depends on the individual. Should you buy an established company, or start your own from scratch?
There are advantages and disadvantages to both paths. Which will cost you more? Do you have a better chance of success going one way or the other? These are important questions, but fortunately, they’re easy to answer.
What Kind of Entrepreneur Are You?
Your preference might come down to what drives you as an entrepreneur. Are you trying to change the world, or are you making an investment in your future?
If you have a novel idea and want to build an empire around your wild innovations, starting from scratch feels like the natural choice. You’ll get to shape every aspect of your business from the ground up. It’s a romantic idea, but it’s more work than most people think starting out. You have to be willing to sacrifice years of your life on a project that might not go anywhere.
Buying an established business is a more reliable option. If you want to be your own boss and grow a company, your chance of success is higher when you have a solid base to start from.
Established companies offer a proven model, strong resources, and greater financial security. You don’t have to reinvent the wheel, you just have to know how to drive. Most will come with personnel who already know the business inside and out.
It can take a long time to develop employees, business models, and vital systems for your start-up. There is a lot of trial and error involved, and this is the big reason that most start-ups fail within five years.
The safe bet is to take ownership of an existing enterprise. When you step up to lead an established company, you get to focus on what you’re passionate about and delegate the rest to your trained staff. Starting from scratch is only necessary if your idea is so unique that it doesn’t exist anywhere else.
What Can You Afford?
Buying a business costs more upfront than starting one, but the situation begins to reverse itself almost immediately after the purchase. The difference in cost isn’t as clear-cut as some might think.
With an existing business, you have the advantage of making money right away. An established cash flow lets you set realistic goals and projections, giving you more control and clarity. You should have a solid idea of when you’ll get your money back before you buy.
Most start-ups don’t turn a profit for quite some time. It’s completely normal to bleed money for the first several years in operation, and there’s no guarantee you’ll ever turn it around. Some ideas don’t pan out, and that means starting over.
You also have to commit to working several years of your life with no income. Far too few entrepreneurs factor this in when they calculate the cost of a start-up.
There is risk involved with both options, but when you start your own company you don’t have a meaningful way to define those risks. If you can finance the purchase of a company instead, you’re in a much better position.
We work with entrepreneurs to find businesses in their industry and price range. The sellers pay all the fees, so you don’t have anything to lose by taking a look at our listings to see if there’s an opportunity available for you right now.