Buy A Business Or Start A Business?
January 11, 2025
Buy A Business Or Start A Business
Is it better to buy an existing business or is it better to start a new business from scratch? That’s a question that comes up frequently in the entrepreneur world. I have done both so I can offer an opinion that comes from having experienced both sides.
Who Are You?
This is an important question that everyone who has ambitions of owning their own business needs to explore thoroughly before taking the plunge. The answer has a lot to do with mindset, attitudes, and personality types. For example, are you the type of person who likes to build or create?
In my real estate business I have bought existing properties and I have built new properties. I have built houses and industrial buildings. I have bought existing commercial buildings and houses. My personality leans strongly toward building. That probably explains why when I buy an existing building I can’t stop myself from doing renovations. The desire to build kicks in and I have to go with it.
There are also buyers who like to buy and hold and those who like to buy and sell and those who are in between. I am between those two. I like to buy or build and hold for two to five years and sell. Even though I know buying and holding is better, it’s just not me. I like making deals.
The same is true with other types of businesses. I’ve also started or bought non-real estate businesses. When someone like me buys an existing business there is a compulsion to start making changes. It can be disastrous if you don’t get that compulsion under control.
It's Not About You
When buying a business there is something very important to remember that a lot of business buyers don’t consider. It’s not about you. There are likely to be other people involved in the company you buy. There could be employees, in some cases decades long employees. There are contractors, vendors, professional service providers. That could include CPAs, suppliers, attorneys, bankers, and so many more that go largely unnoticed.
The owner of that business hired each of those people one at a time. They screened them, vetted them, interviewed them, and hired the person that best suited their needs. Then they worked with them every day and developed a working relationship with them. And hopefully there is a communication bond between them.
Then You Happen
Then you come along and buy the business. You’re an outsider. And you are getting all these people all at once with no relationship to them at all. If you aren’t the type of person to step into a company and run what is already working and make changes slowly, this situation could backfire. I’ve seen many companies bought by an eager buyer who makes sudden and drastic changes without considering the people involved or the success of current business operations. Many of those companies no longer exist.
Starting New
Starting a business can be very satisfying for someone who is the inventor type, someone who likes to create. If that’s not you then you should probably stick to buying. If that is you then you should not buy. You should start a new business and build it from the ground up. It will satisfy your creator urges and you will have more of a passion and love for the business than if you bought it.
Here's the interesting twist to the whole discussion. You can do both. Start and build your business from scratch. Once you are operating and have good cash flow, have a good working team in place and your operations are running smooth, then you could start looking to expand by buying other businesses. Buy another business like yours or a complimentary one. If you’re an HVAC company buy another HVAC company from the guy across town who is retiring. Buy a plumbing or electrical business. They work hand in hand with HVAC companies.
There are a lot of possibilities to consider. Just be sure you choose the right path for you. A lot of businesses have gone broke just because the owner started new when they should have bought. Or bought when they should have started new.
Here’s a book recommendation that might help with a decision like this.
Put Your Dream To The Test by John Maxwell