Why Buying a Business Is Better than Starting One from Scratch

Whether you’re buying a business or starting one, the entrepreneurial journey is a thrilling ride, regardless of its challenges and risks. 

But which one is the better choice…buying a business already established or starting one from scratch?

While both options have their merits, the advantages of buying an established business often outweigh those of starting from the ground up. 

In this article, we’ll dive into the pros and cons of both starting and buying a business and make the case for why buying a business is the better choice.

Starting a Business: The Adventure Begins

Launching a startup is akin to setting sail on uncharted waters. 

There’s so much uncertainty and it requires a large dose of creativity and resilience.

Typically, an entrepreneur begins with an idea, develops a business plan, secures funding, and builds their enterprise from the ground up. 

Yet this road is riddled with obstacles and difficulty…and sometimes with failure.

Pros of Starting a Business:

• Creativity and Control: You have the freedom to shape your vision from inception, steering the business in any direction you desire.
• Fresh Slate: No existing liabilities or reputation, providing a clean canvas to implement innovative strategies.
• Potential for High Returns: Successful startups can yield substantial profits and create lasting value.

Cons of Starting a Business:

• High Failure Rate: Statistics reveal that a significant percentage of startups fail within the first few years due to various factors, including market volatility and lack of experience. The actual statistics vary, but it’s extremely high.
• Resource Intensive: Building a business from scratch requires significant time, effort, and financial investment.
• Market Uncertainty: New ventures face the daunting task of establishing the brand and gaining traction in a competitive marketplace.

Now, let’s break down the math for starting a business… 

Suppose an entrepreneur estimates the initial investment for a startup to be $100,000, factoring in costs such as product development, marketing, and operational expenses. 

If the business fails within the first year, the entrepreneur not only loses their investment but also incurs potential debt from loans or personal funds.

The risks are very high.

Buying a Business: A Shortcut to Success

Contrary to starting a business, acquiring an existing enterprise offers a shortcut to entrepreneurship. 

When purchasing a business, you inherit an established customer base, operational infrastructure, and revenue stream. 

This approach takes away many of the risks associated with startups while providing a solid foundation for growth and expansion.

Pros of Buying a Business:

• Instant Revenue Generation: Acquiring an existing business means tapping into an established customer base and revenue stream from day one.
• Proven Track Record: Unlike startups, existing businesses have a track record of performance and market validation, reducing uncertainty.
• Operational Efficiency: Many businesses for sale come with established processes, systems, and trained staff, streamlining operations.

Cons of Buying a Business:

• Initial Cost: The upfront cost of purchasing a business can be substantial, depending on factors such as industry, size, and profitability. However, there are ways to buy a business without using any of your own money.
• Integration Challenges: Assimilating into an existing business culture and implementing changes can pose challenges.
• Hidden Liabilities: Buyers must conduct thorough due diligence to uncover any hidden liabilities or risks associated with the business.

Now, let’s delve into the math behind buying a business… 

Suppose an entrepreneur purchases an existing business for $2,000,000. With the business already generating $1,000,000 in annual profit, the buyer can potentially recoup their investment within two years. 

Additionally, financing options such as SBA loans or seller financing can alleviate the need to use personal funds.

Check out my article How to Buy a Business without Using Your Own Money.

In a Nutshell 

Why Buying a Business Reigns Supreme…

When weighing the options between starting a business and buying one, the advantages of acquiring an existing business far outweigh the uncertainties of starting from scratch. 

Not only does buying a business offer a faster route to profitability, and can be profitable right out of the gate, but it also provides a higher likelihood of success, thanks to its established customer base and operational infrastructure.

Also, the notion that buying a business necessitates using one’s own money is a common misconception. 

With financing options readily available, entrepreneurs can leverage other people’s money to fund the acquisition, minimizing personal risk.

In fact, using your own money to buy a business is not necessary and only increases the risks involved.

In short, the thrill of creation is alluring.

The choice to become an entrepreneur leads many aspiring business owners down the path of acquisition. 

And by buying a business, you can bypass many of the pitfalls associated with startups to position yourself for more success and greater abundance. 

Want to learn more about business acquisition? Check out Carl Allen’s YouTube channel with some great advice.