Buy vs. Build - The Ultimate Decision
You may be thinking to yourself, “why would I buy a business instead of starting my own?” and unsurprisingly, this is something we get asked all the time. Everyone wants the legacy of “I built this business from the ground up” but scaling a business is arguably more impressive than starting one yourself.
When confronted with this question we don’t think that there is an answer that is correct for every situation. To determine the best option, you must be able to see the long-term outcomes of either possibility as well as assess the short-term prospects for the business and how that will impact your finances.
Typically, buying an existing business has a much higher rate of success than starting a business from scratch. Statistics state that 70% to 80% of start-ups are not around by year three or at best, year five. There are many reasons for this. Existing businesses already have established:
✓ a proven track record
✓ cash flow from loyal customers on day one of new ownership
✓ advantages of a position in the marketplace
✓ mentorship from the seller of the business
✓ more favourable financing available
✓ existing staff already in place
Also, the previous owner has made mistakes that you, as the new owner, won’t do because you will have access to the valuable knowledge they have gained about the business.
