Pros & Cons (Solutions) : Buying Existing vs. Starting New

Many first-time business owners frequently ask me this crucial question: "Would it be better to buy an existing business or to start a new one?" I always respond, "It depends." Both alternatives have specific benefits (Pros) and drawbacks (Cons), which I have concisely summarised in this essay. I've also taken the liberty of giving a few potential solutions for each of the drawbacks (Cons) connected with both pathways because I'm bursting with enthusiasm for problem-solving.

Buying an Existing Business

Pros:

1. Proven Concept: You're acquiring a business with a successful track record.

2. Established Brand and Customer Base: You get a recognised brand and the loyal client base.

3. Current Employees: You are getting a team with great knowledge of the business and its customers. You are unlikely to spend more on training the existing staff.

4. Easier Financing: Lenders frequently favour well-established companies with a track record of profitability.

Cons (and Solutions):

1. Higher Cost: Purchasing an existing business can be costly. However, you can try negotiating the payment terms with the seller for seller financing/ vendor financing and spread out the payments in monthly instalments over a period of time. Some sellers will accept it but many won’t.

2. Hidden Problems: There might be hidden problems in the business. To mitigate risk, you will need to conduct a thorough due diligence. You will need to hire a competent lawyer and a financial expert to verify and review all aspects of the business before you complete the purchase.

3. Legacy Issues: It's possible that the prior owner left you with issues. Create a thorough transition plan and, if necessary, a rebranding strategy to address this.

4. Limited Flexibility: It might be difficult to make substantial adjustments to an established business. To adapt the business to your vision, however, small, data-driven modifications can be made over time. It’s not advisable to have major changes at the beginning unless you are 100% sure of the outcome.

Starting a New Business

Pros:

1. Total Control: You are free to build the business precisely how you want it.

2. Lower Initial Cost: Depending on the sort of business, starting from scratch may be less expensive.

3. No Baggage: You are beginning from scratch and are not burdened by legacy problems.

4. Unlimited Potential: A startup business may have a lot of room for growth provided you have a solid tested business plan with achievable actionable items.

Cons (and Solutions):

1. Work and Time: Starting a business takes a lot of effort. This can be avoided by developing a strong business plan, teaming up with a motivated team, and automating procedures whenever practical.

2. Greater Risk: The failure rate of a new business is significant. By doing extensive market research, starting small, and promptly making adjustments in response to user feedback, you can lower this risk.

3. Difficulties Obtaining Financing: Financing for new businesses can be difficult. You can mitigate this by investing your own money, obtaining funding from family and friends, using crowdfunding websites, or obtaining venture capital.

4. Inexperience: Launching a business might include a steep learning curve. You can ride this by consulting with mentors, employing knowledgeable personnel, and continuing your education and adaptation efforts.

There are some businesses where the barrier to entry is so high that most buyers end up buying the existing business. So, it completely depends on your personal circumstances, risk appetite, and business goals to acquire an existing business or start a new business. Both can lead to success when tackled carefully and intelligently, but both also have potential benefits and obstacles.