Starting A New Business Vs. Buying An Existing Business
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Are you tired of your nine-to-five job and would love to start your own business?
If that’s the case, one would argue that there’s no better place to do so than in Australia.
That’s because, with over 2 million small businesses, including 1.4 million sole traders, the small business sector represents a significant component of the country’s economic landscape.
But while many decide to start their own business to follow their passion or achieve a better work-life balance, it’s important to note that 60% fail within three years of inception.
Starting a new business isn’t easy. You need the skill set, perseverance, patience, drive, and ability to handle extreme stress to be successful.
Now, if you aren’t sure you have the patience and skills to build something up from scratch, you could always buy an existing business. In some cases, it can prove a little bit easier, but you need the funds to purchase an entire company.
To help you make the right decision, we’ve highlighted below some of the pros and cons of starting a new company vs. buying an existing business.
Pros Of Buying An Existing Business
Successful Business Model
Buying an existing business means buying into a proven business model. As you thoroughly research the business you’re considering buying, you’ll have the ability to select a successful company that has implemented an effective business strategy leading to years of profits and a loyal customer base. The services or products have already been successfully market-tested, making future success more likely.
It’s Quicker To Start
Starting a business from scratch means putting together a business plan, conducting thorough market research, finding the right location, sourcing the right vendors and suppliers, hiring experienced staff, etc. When you buy an existing business, you also buy the previously established relationships, which significantly simplifies the startup process. Besides, you also inherit a successful business model and marketing strategy.
And even though you want to adjust the direction of the business, you’re starting with solid foundations.
Branding Is Already Established
Developing a brand is extremely difficult. In fact, it’s one of the most time-consuming and resource-intensive aspects of running a business. And sometimes, despite all your efforts, creating a recognisable brand that appeals to your customer base can take several years or even never happen.
Buying an existing business means that you don’t have to worry about branding and can allocate your time and resources to growing other aspects of your company. You may also opt to rebrand an existing business to give it your own flair.
Cons Of Buying An Existing Business
Heavy Upfront Costs
Buying a successful company can be quite expensive, explaining why so many people prefer to start from scratch. All the pros listed above come with a high price tag because you purchase a proven business model that is likely to help you quickly generate cash.
Operational Changes Might Be Necessary
Even though you did your due diligence and bought a successful business, you might face unexpected challenges, including resistance or hostility from disgruntled employees or dealing with unreliable suppliers. And this can hinder your ability to generate cash as quickly as originally thought. Add to this a high purchasing cost, and you get a recipe for cash flow problems.
Pros Of Starting A Business From Scratch
Be Your Own Boss And Follow Your Passion
3.4 million Australians dislike their manager. And if that’s your case, being your own boss could be an extremely compelling reason to start your own business. No more dealing with managers you don’t like or don’t agree with. You’ll be the one making decisions!
What’s more, 25% of Australians are unhappy at work. And there’s nothing more frustrating than sitting in an office all day doing things you find meaningless. If you’re passionate about something, starting your own business in that space could significantly contribute to your overall happiness.
Starting your own business can allow you to set your own hours and work around your personal commitments. For instance, let’s say you’ve decided to become a freelance graphic designer. Rather than going to the office every day at a set time until the end of the day, you can pick and choose your projects based on your availability and work whenever is convenient for you.
You Can Earn More
If you’re skilled at what you do and there’s demand for your products or services, the sky’s the limit when it comes to your earning potential. Unlike when you’re working for someone else, starting your own business means that you can set your own rate and cut out the middle man! And even though it might take a while for you to start being cash flow positive, once you’ve established your brand and a loyal customer base, you’ll be able to increase your earnings.
Cons Of Starting Your Own Business
It Can Feel Lonely
If you’re starting a business on your own, there might be times you feel lonely. Starting a business from scratch is challenging, and not being able to rely on anyone else or bounce ideas off someone else can take an emotional and mental toll on you. And even when your business is up and running and you’re starting to make consistent sales, working on your own all day could be difficult mentally.
No Job Security
Even though you could earn more than in your previous job, you could also earn less. When starting a business, there is no insurance you will succeed. And leaving a stable job providing consistent pay can be daunting, especially when the time comes to pay your bills.
There is no right or wrong answer to whether you should start your own business or buy an existing one.
As mentioned before, if you have the funds to buy an existing company with a proven track record, you might have an easier time generating cash quickly. However, if you don’t have the funds or are passionate about something in particular and want to craft your business according to your vision from the get-go, starting from scratch might be an excellent idea.
How Can upcover Help You In This New Venture?
Whether you decide to start a new business or buy an existing one, you’ll need business insurance. Cash flow problems deriving from costly claims and legal action can run your business into the ground.
So, don’t overlook this step and jump on our free instant quote generator, where you can get an estimate on market-leading insurance in seconds.
Simply enter your occupation and expected revenue to get started.