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Is it better to start a business or buy an existing company?

On Behalf of | Dec 15, 2022 | Business Formation And Planning |

Entrepreneurship is on the rise in America. According to the US Census Bureau, more than 4 million new businesses are started each year. In Texas alone, there are currently 3.1 million small businesses, and they employ more than 45% of the private workforce in the state.

If you’re thinking about striking out on your own, your first decision is whether to start a business from scratch or buy an established company.

Startup vs established company: Which is best for you?

All businesses require work, probably more than you’d think as you daydream about being your own boss.

However, running a startup requires you to begin from zero in almost every way. Purchasing an established company lets you start at third base.

There are benefits and drawbacks to both options. Here are a few points to ponder.

• Purchasing an existing company allows you to benefit from easier access to financing. Banks are more likely to extend a loan for a proven business model than to fund the untried and untested. You’ll also have some cash flow available, which gives you more flexibility for expansion and support.

On the plus side for startups, you can launch according to your available budget and build organically. That’s an exciting prospect for some, especially solo professionals working from home. There’s a great deal of satisfaction in watching your small business grow into a flourishing enterprise.

• Buying a company allows you to acquire existing customers and vendors. Starting from scratch means building brand awareness and a customer base beyond family and friends.

• Reputation is another consideration. Make sure that the existing business has a good track record of financial stability and customer service, or you’ll have an uphill battle on your hands.

When you’re starting a new business, you’re able to begin with a clean slate. That is, you do not inherit pre-existing problems.

Final thoughts about becoming your own boss

Before you consider joining the ranks of Texas entrepreneurs, it’s a good idea to learn a little about business law, taxes, and concepts like corporate structure. The solo practitioner of an S-corp carries different legal, filing, and reporting requirements than those creating a partnership or LLC.

Being your own boss is difficult, but can also be very rewarding if you go into it with a clear vision and an open mind. Some people prefer to take over an existing concern when they’re new to business ownership. However, if you have financing and a product or service you’re passionate about, then a brand-new startup may be the right option for you.