Is Buying an Existing Business Better than Starting One?

If you’re like a lot of people, you’ve had at least one crummy job—and/or crummy boss—in your life. It may have started out alright at first, but then the luster wore off, cracks started showing, and the days started feeling long. If you’ve had this experience, or even just known someone who has, it’s not difficult to see the appeal of being a business owner and your own boss.

If this is your dream, you have a few main options to become your own boss, each with their own pros and cons. You could:

Start your own brand-new business,
Purchase an existing business for sale, or
Buy a franchise to operate.

Let’s take a closer look at each of these options so you can better understand the potential risks—and payoff—of each and make the best decision for your future. We’ll start with starting your own brand-new business.

What Are the Advantages of Starting Your Own Business?

Is buying a business better than starting one?

While starting a brand-new business might sound like an intimidating prospect, for many people it’s the first thing they think of when considering how to become their own boss. If you’ve got determination and drive, it can be a positive and rewarding experience. Some of the advantages of this approach include:

Independence. When you work for yourself, you have the ultimate freedom and flexibility to run your business exactly the way you want to. From the work environment, to staffing, to product and service offerings, marketing, and so on, virtually every aspect of your business is customizable.
Fulfillment. Starting your own business—and making it successful—is what many people consider to be the ultimate dream. And for many, there’s something inherently noble about going it alone and proving to yourself that you can do something life-changing when you put your mind to it. Creating your own business means you can do what you know and love, day in and day out.
Community. When the business is fully your own, then you can literally choose who you surround yourself with and how your business engages with the local community. All of the staffing decisions are yours, so you can put together a leadership team and employee base that will work well within the confines of your vision and objectives for the business. This way, you can establish the type of company culture you think is best. You can also decide how you want to engage with the community. For example, if giving back to the community is a passion of yours, then you can build local connections and service opportunities into the business blueprint.
Profits. There are countless variables that will impact whether or not your business is going to thrive—and, by extension, whether you’ll profit. When it’s your business, though, you have total control over how you balance revenue and expenses. You control it all: the sales and marketing budgets, staffing and compensation, product and service pricing models, and so on.

What Are the Disadvantages of Starting Your Own Business?

The disadvantages of starting your own business largely center around the challenges of building a successful blueprint and setting yourself up for both near- and long-term success. Some of these challenges include:

Coming up with a catchy and memorable business name and establishing brand awareness.
Developing sales and marketing strategies to attract and retain customers.
Keeping up with the market/competition.
Balancing immediate, daily needs with longer-term, sustainable planning.
The continuous need for monitoring and problem-solving.
Building the right team—including leadership roles and general staffing.
Developing workflows and business systems to keep operations running efficiently and effectively.
Creating a company culture that inspires employees to give their best.
Being resilient and flexible in the face of challenges as they arise.

Another disadvantage of starting your own business is the level of risk you assume. In business and in life, nothing is guaranteed. You might come up with a foolproof-seeming idea, for example, but one bad decision could undermine everything. And whether the business succeeds or fails, it’s ultimately all on your shoulders.

What Does Buying an Existing Business Mean?

There’s little mystery about this: buying an existing business means precisely what it says. You would find an existing business that’s for sale, evaluate whether it’s the right opportunity for you, and pay the owner an agreed-upon price to take full ownership of the business. Let’s take a closer look at why you might consider this path, and briefly cover the pros and cons of buying an existing business.

Why Would Someone Buy an Existing Business?

The most compelling reasons for buying an existing business center around the idea of purchasing a proven commodity with an already-established customer base. Rather than having to create your own extensive business plan, you simply take over what’s already in place, including:

An established brand (brand recognition)
An existing customer base
A general budget and business plan
Employees that are already up to speed

Each of these points, of course, may represent advantages or disadvantages, depending on the state of the business you’re considering buying.

That’s not to say that when you buy an existing business you have no control over how it operates. In fact, a great deal of autonomy comes with an existing business—more specifically from the fact that you’re now the boss. This means the future direction of the business is fully in your hands and it’s your reputation on the line, so you’ll want to make sure you’re willing to take on that level of responsibility if it’s going to succeed.

Is It Easier to Buy an Existing Business than Start a New One?

In many ways, yes. As described above, it’s generally easier to buy an existing business because a lot of the heavy lifting has already been done by the previous owner, who likely developed the business plan, established the brand, and built a customer base. If you were to start your own business entirely from scratch, these considerations alone could prove overwhelming. Additionally, buying an existing business significantly reduces the time it takes to get the operation up and running, funded, staffed, and so on. For these reasons, when buying an existing business it is important to fully understand the details that may determine success or failure.

Is Buying a Business Profitable?

When compared with starting a brand-new business, buying an existing business typically presents a clearer—and shorter—path to profitability. This is largely because you don’t have to front a large amount of money on “new business” type expenses, like getting your business’s name out there, building out and funding initial marketing campaigns, or investing in basic technology and infrastructure. Instead, you can simply cover the upfront cost and then pick up where the previous owner left off.

What Are the Disadvantages of Buying an Existing Business?

When buying an existing business it is important to consider the potential disadvantages, which include:

Risk. Whether you buy an existing business or start your own, you’re going to have to be comfortable with a certain level of risk. There’s always the chance that even an established business could ultimately fizzle—or that the previous owner has been less-than-forthcoming about particular issues or challenges they’ve faced with the business. While this is unambiguously wrong, it does happen—it’s not unlike buying a property or a used car, in that you can never know, with 100% certainty, what you’re getting.
Financing. Even if you’re in generally solid financial standing, businesses are expensive and obtaining financing for all or part of the purchase can be difficult. First, you’ll need a decent chunk of change to serve as your initial investment. From there, understanding the different financing options may or may not make your head spin. Prospective business buyers are smart to explore these opportunities carefully before proceeding with the business purchase.
Branding. While an established business is already branded, extending that brand and making it your own can be difficult. If you have your own vivid ideas of how you want to represent the business and stamp your own imprint on it, making major branding changes can alienate loyal customers and create confusion within the market.
Planning. Once you take over the reins of an existing business, it’s your turn to chart the company’s destiny—which can induce anxiety if you’re not fully prepared. You’ll want to make sure to gain an understanding of what the previous owner’s guiding principles and plans were, so you can determine whether you want to continue down the preset path or take advantage of the autonomy to create your own. While these represent clear risks of buying a business, they also present an excellent opportunity for personal success.

What Should You Consider Before Purchasing an Existing Business?

With the stakes so high, and the difference between success and failure being so great, it’s important to consider the advantages and disadvantages of purchasing the business (as we’ve covered above). Ultimately, you have to decide whether the benefits outweigh the drawbacks—and if you have the skill set and determination to ultimately make it work in your favor.

Before you decide whether to buy an existing business or start a new one, we would also recommend considering another option altogether: buying a franchise.

What Is the Difference Between Buying an Existing Business and Franchising?

The biggest difference between buying an existing business and franchising is the level of risk you assume. When you buy an existing business, you’re buying—and ultimately owning—everything about it, including its success or failure.

By contrast, a franchising business model is one in which you (the prospective “franchisee”) buy the rights to the business’s logo, name, and general operations model from the business owner (or “franchisor”). Some of the most popular franchises in America include chain restaurants like McDonald’s, Sonic, and Dunkin’; workout facilities like Anytime Fitness and Planet Fitness; and many more. If you’ve been to multiple locations of any of these franchises, then you’ve likely noticed that they have a lot in common across locations (general branding, for example), but are not necessarily cookie-cutter copies of each other, and may be run somewhat differently from one location to the next.

What Are the Advantages of Buying a Franchise?

celebrating an advantage

1. Low Startup Costs

Starting a new business can cost around $30,000 to $40,000 (or more) in just first-year expenses. By contrast, Franchise.com has many franchises available for a total investment of $50,000 or less.

2. Easier Access to Financing

In many cases, it’s easier to access financing for a franchise location than when buying an existing business or trying to start a brand-new venture. Many franchisors offer funding assistance for the initial franchise purchase agreement. After all, the franchisor wants to see the franchisee succeed, as it’s good for the larger organization’s reputation and potential success. You can also consider commercial bank loans or U.S. Small Business Administration (SBA) loans as reputable financing options.

3. Business Assistance

When you buy a franchise, you inherit an automatic network of potential supporters. For example, the franchisor provides guidance in understanding and executing the franchise’s larger goals and operational details, and your fellow franchisees also serve as a useful network. If you’re not confident in your business acumen or expertise, but want to be your own boss, this is a definite advantage for the franchising model.

4. Brand Recognition

For many people, this is the first benefit of franchising that they think of. When you purchase a franchise with a well-known name, brand, and image, then you can truly hit the ground running—without the need for extensive marketing and brand awareness campaigns.

5. Be Your Own Boss

If brand recognition isn’t the first franchising advantage you think of, then the prospect of being your own boss most likely is. There’s something undeniably attractive about the idea of stepping into boss-sized shoes, making your own decisions, and succeeding on your own terms. There will, of course, be certain elements of any franchise that aren’t meant to be tinkered with—basic branding, for example—but plenty of room to tailor any opportunity to your own style. You can develop the relationships and community initiatives that the business can support, further putting your own individual stamp on the company and its image.

6. Lower Costs on Goods

Depending on the nature of the franchisor-franchisee relationship, you might be able to save a considerable amount of money on the basic products and resources you need to stock your business. This is because the franchisor typically orders larger quantities of certain goods than a single location might purchase for their own needs, meaning a significant bulk discount (with savings being passed along to you, the franchisee).

7. Higher Success Rate

While success is, of course, not guaranteed, the data around this point should be encouraging, to say the least. The data shows that while only 37.5% of start-ups survive more than five years, 85% of franchises make it to the 5-year mark. In other words, you’re at least twice as likely to reach that critical milestone by purchasing a franchise than starting a new business.

Where Can I Find Franchising Opportunities? Start Your Search at Franchise.com!

A trusted industry leader for over 25 years, Franchise.com is home to a wide variety of franchises available for purchase, spanning over 40 industry-based categories, including:

You can also browse categories like low-cost franchises, work-from-home franchises, new franchise opportunities, or the top 25 trending franchises. Or, you can search for opportunities by state or franchise cost. Start your search today!