I am often asked ‘is it better to start a business or buy a business?’ The answer is ‘it depends.’ It seems there are two entrepreneurial types – those that would only start a business and those who would only buy a business.
There is risk and anxiety in both. They both cost money, perhaps the same. Why you ask? Well, the person who starts the business has some time and money to get going, to begin and then continue to build clients/customers. Slowly the money starts to come in and the owner is meanwhile dipping into their pocket to pay the household bills. The person who buys a business spends more up front but has immediate cash flow to pay those household bills – unless they bought wrong or had another long term strategy. Either could go badly – ill conceived or poorly managed startup idea or bad purchase or poor management of an existing business. Either could be impacted by an economic downturn.
The diagram below was recently shared with me. While it is directed to the start up, it can also apply to the purchase. I know, having done both. In one purchase, it was a delightfully profitable business and continued to be – but reality did set and and for two years I had a number of sleepless nights fretting about whether it would work and how it could expand. It all worked out but, really, it might not have. A start up I tried with a friend failed with money, time, and pride lost.
What experiences have you had or seen that speak to success or failure from either a purchase or a startup?
