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What to Choose: Buy a Business or Build it from Scratch?

by TNS Experts

Is there a business idea that has been haunting you for a while? Or maybe it's not just an idea, maybe you have an entire plan. Also, it could be the desire to lead and administrate that is overwhelming you now, but with the lack of a business plan.

Anyways - trying yourself in the business game is the path you might be willing to explore. But here is the question: should you buy a business on a marketplace or it would be a better idea for you to start one from scratch?

Table of Contents

  1. 1. Why Buy An Existing Business?

  2. 2. Why Start A New Business From Scratch?

  3. 3. A Bridge Between Two Options

1. Why Buy An Existing Business?

Starting out entrepreneurs usually struggle to get on the track of the stable incoming cash flow. Harsh truth is that some businesses even die before they reach that track.

And here is what makes buying an existing business or a business plan (franchise) so attractive. This way you can get the stably coming revenue or at least the proven scheme of how the revenue will come to your business.

As a business owner, you will start by performing the role of an executive without the necessity to deal with the problems associated with building a business from scratch and will be free to think about the development options while having some ongoing processes that can bring money at the moment.

Let's look closer at what makes buying a business a good option and what pitfalls it may have.

Go And Buy A Business - It Is Amazing

There are many ways to become an owner of an existing business - buy it on specialized websites or directly from business owners, getting buying a franchise.

And surely purchasing a business has benefits, such as:

  • The built brand and what comes with it - recognition, customers’ loyalty, the space for creativity in using the brand.

  • The existing products and services, so that you are free to create a marketing strategy or make corrections in the already working strategy.

  • Ready working operating systems.

  • Sometimes former business owners (or franchise owners) are ready to assist new business owners, give a hand in critical problems and answer questions, especially in the beginning.

  • The risk for the business to fail or go bankrupt reduces considerably compared to the business built from scratch.

Are You Sure You Want To Go And Buy A Business?

It cannot be that simple and nice. Of course, when buying a business you may come across problems and should be ready for certain issues, for example:

  • The initial investment. Sure, to purchase a business usually you would need seed capital. The cost of purchasing a business could be quite high.

  • You get the business or business plan, but also you might need to purchase equipment or marketing materials. Here come additional expenses to expect.

  • You might be limited in the ways you conduct business, especially if it is true for franchisees. The ready business scheme has many advantages, but it can tie your hands tight in terms of initiative and creativity in running the business the way you see it.

  • When you purchase a business you get it all together - with its working processes and revenue and with its problems as well. There is always a risk to buy a business that has hidden problems the former owner prefers to be silent about.

So, buying a business has pros and cons to think about. And it would be better to study them properly before getting into the game.

2. Why Start A New Business From Scratch?

Starting a business from scratch is a paradise of creativity for newborn entrepreneurs. They use all the creativity to reduce seed capital, to create new amazing things, they make their own rules and their own way in everything. Wonderful, isn’t that? Let’s have a closer look.

Yes, Building A Business From Scratch Is A Great Idea

Starting a business is like pulling puzzle pieces all together to make an amazing something. You develop an idea, you take care of this idea to be brought to life. Here are some of the advantages you get when taking an idea and turning it into a working business:

  • You get full control over the business core and concept, you choose how to build a brand and the whole operating system.

  • You have all the space to use creativity.

  • Building a business gives you the opportunity to use your unique skills, background, knowledge, and the passion you might have.

  • The sum of money you start with can be as small as you want as long as you can come up with a way to make it work.

No, Building A Business Is Not Always The Best Choice

The negative aspects of starting a business stop so many of us with great ideas from actual actions. Here are some of the drawbacks of building a business from scratch:

  • Even if you have employees (which is not always the case for starters) after all it is you who has most of the responsibility for the success or failure. Sometimes the entrepreneurs who start out have to perform many roles at once - accounting, sales management, creating a marketing plan, and so on. That is a tremendous amount of work.

  • The risks are high everywhere - it takes time to predict them and come up with the action plan if the risk situations happen. And it takes great courage to be ready for the risks you cannot foresee.

  • Reaching a stable profit can take a long while with all the testings and learning curves.

Becoming an entrepreneur is a nice path, an adventurous one. But the one who chooses should be ready to face difficulties and be ready to get over troubles and fight for success.

3. A Bridge Between Two Options

A franchise option can be an ideal bridge between building a business from scratch and buying an existing one.

How it works in general: you get the license to conduct business under the existing brand and using the existing business plan and tools. Sometimes you also get the training and expert assistance from the beginning.

The starting budget can vary - from hundreds of dollars to millions.

As a franchise holder, you may conduct business and fully feel like an entrepreneur. But you should be ready to follow rules made by franchise owners. Also, to conduct a franchise you would need experience running a business, after all, you have a plan, but you are going to be the one who takes action.

Summing Up - What Is Better For You

There is no universal answer to this question. As, probably, everything in this wonderful awful world, both buying an existing business and building a one from scratch has pros and cons to think about. You should take into account everything - the time, the money, the experience you have - to come up with the ideal scenario for you to get into the business world and become a successful player out there.

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