​

When making the decision to start a new chapter in your professional life by going into business for yourself, there is an important question that one must ask….whether to buy an existing business in a particular industry or sector, or to start a new business in that same space.   There are benefits and drawbacks to each.   Ultimately, the decision lies in your hands and what fits best with your particular situation.   Here is a checklist of the pros and cons of doing each.

​

Buy an existing business

• Pros

  • Established customer base

    • Existing cash flows from customers

  • Team set - employees in place, no training required

  • Turnkey opportunities, no or little startup time requirements

    • Employees in place

    • Office space set

    • Vendor and inventory management set

    • Customer base exists

    • Brand is developed already

  • Not as difficult to acquire working capital if necessary

    • Lenders have existing business to review

• Cons

  • Competition in market segment is on the rise

  • Organizational changes may be required

    • Employees may be a problem

      • Bad employees

      • Employees retention with new owner

  • Operational changes may be required

    • Equipment may be outdated, inefficient

    • Building may not be adequate

  • Inherit previous owner problems

    • Employees

    • Reputation

    • Bad location

    • High debt levels

    • Inventory issues - sourcing, rising material costs

  • Value paid is not the same as the value that was received

    • Bad due diligence

      • Debt levels decrease cash flow significantly

    • Incorrect financial outlook

    • Customer base not as solid as thought

 

Start a new business

• Pros

  • You did it your way

    • Your the boss, no more working for the man

    • Your passion is becoming a reality, pursue a career in something that is rewarding to you

  • More flexible work requirements

  • Opportunity to make more money as an owner

• Cons

  • Much more difficult to do than buying an existing business

    • More effort needed to succeed

    • Time consuming for the principal

      • More hours

      • Difficult on family

    • Longer startup time

    • No guidance on proper way to start a new business

    • Income stream not existent to begin, slow to grow

  • Lack of experience may hinder ability to succeed

  • Lack of benefits

    • Insurance, retirement plans

  • Start up time is higher

    • Need to:

      • Hire employees

      • Set up vendors, purchase inventory

      • Purchase or lease space

      • Create brand awareness

  • Risk of failing and losing it all