Should I start a business or buy an existing one?

Most people who want to run their own business usually choose to grow it from the ground up. They go through the risky and stressful startup period in the hope that their business is one of the 40% that survive beyond five years.

However, these days, that’s not your only option as an aspiring entrepreneur. Existing businesses are readily marketed online, making it much easier to identify an opportunity and buy a business than it used to be. 

Although the upfront costs of buying an existing business vs. starting from scratch are likely to be higher, you will benefit from a proven track record, loyal customers and established operational systems. That allows you to skip the early growing pains and increases your chances of survival. 

So, should you start a business or buy an existing one? Here we explore the pros, cons and key considerations of each method to help you find the right strategy.   

Start from scratch vs. buy a business - which is best? 

Starting a new business

Starting a business from scratch and growing it from the ground up is the most common route to business ownership. It is well suited to entrepreneurs with a new idea or a strong vision who are willing to navigate the unpredictable early stages and have the time to put the work in. 

Starting fresh gives you creative and operational freedom, but it also brings complexity. You are tasked with doing everything required to bring your idea to life, from creating a saleable service or product to building a brand, finding customers and setting up the operational systems that keep everything running smoothly. You must also manage finances, hire and train staff, market your offering and adapt quickly when challenges arise.  

Understandably, that can feel overwhelming. The early stages of a startup can also be slow. It can take many months, and in some cases even years, before the business generates a return. You must have a plan to support yourself during that time. Failure rates for new businesses are also high, so even after all that work, you may never make it through those early stages. 

Advantages of starting a new business

• You have complete control over the business, including its name, location, brand and culture
• There’s a lower initial investment if you start small
• You can design the operations and processes from scratch
• There are no existing liabilities, legal issues, reputational problems or onerous contracts or leases
• You can choose how you grow and the rate at which you expand 

Disadvantages of starting a new business

• Failure rates are high, particularly in the first five years
• It can take many months or even years before the business is profitable
• You must build every part of the business from scratch, which can stretch the skillsets of even the most well-rounded entrepreneurs 
• There’s a significant time and energy investment
• It can be difficult to secure funding from banks or investors without a proven track record or steady revenue stream

Buying an existing business

Rather than building a business from the ground up, another option is to buy an existing one. Buying an established business gives you a crucial head start. The revenue streams, team, and customer base are already in place, and the business will be making money and ideally turning a profit. 

Failure rates for established businesses are also far lower than those of startups, and demand for the product or service, which is the leading cause of startup failure, has already been established.  Detailed financial records will also be available, so you can get a clear picture of precisely what you’re buying.   

Of course, there are various reasons why people choose to sell their businesses. While some owners may want to retire or cash in on their hard work, other firms may be underperforming or require new ideas or investment. Conducting thorough due diligence and working with an experienced business transfer agent to source opportunities will help you find the right venture.   

Advantages of buying an existing business

• You can generate revenue from day one
• There’s a proven business model that has been tried and tested
• An established brand and customer base provide a solid foundation for future growth
• It’s easier to secure financing due to financial statements and a proven track record
• The failure rates are far lower than for startups

Disadvantages of buying an existing business

• Buying an existing business requires a significant initial investment
• You may feel constrained by systems and decisions made by the previous owner
• There can be a risk of overvaluation and hidden liabilities, which is why you must always perform thorough due diligence
• Existing staff and customers may be resistant to change
• Established businesses tend to be less agile than startups and slower to adapt to changing customer preferences or regulations 

Start from scratch or buy a business - the key considerations

Finding the right path for you - whether you start a business or buy an existing one - is dependent on your personal circumstances. Here are some of the key considerations.

Risk tolerance

Starting a new business carries more risk than buying an established one. If you are young and do not have expensive housing costs or a family to support, you may be more willing and able to start your own firm. On the other hand, if you need more stability and immediate cash flow, buying will be the better option. 

Financial resources

Startups can begin as relatively small investments that grow over time. You will need some money behind you, as financing can be hard to find, but the upfront costs can be relatively low. Buying a business requires more upfront capital, but lower risk means lenders and investors are often more willing to provide funding. 

Skills and strengths

Some people are better suited to life in a startup than others. Creative, flexible thinkers who can handle the fast pace and uncertainty and adapt quickly to change often thrive in this environment. If you see yourself more as a manager or problem-solver and prefer a more structured and predictable setting, you’re probably better suited to buying an established business. 

Market opportunities

The right strategy also depends on the type of business you want to run. If your business idea is new or innovative, you may have no choice but to start it from scratch. However, if you’re planning to enter a sector with several well-established competitors, buying a business will give you instant positioning.

Expert support when buying an existing business

If you decide that buying an existing business rather than starting new is the right approach, at Eddisons Business Sales, we can provide end-to-end support throughout the process. 

Our experienced business transfer agents identify opportunities based on your location, sector preferences and budget. That includes off‑market deals that are not publicly advertised. We also assist with due diligence, help you present a strong case to lenders and investors, and advise on vendor negotiations.  

Find out more about buying a business, including the various sectors we serve, and register as a buyer to receive details of opportunities that match your criteria. Please also get in touch if you’d like to discuss your business-buying goals with our team.