Welsh Government

I gael cymorth neu gyngor busnes

03000 6 03000

‘Dechrau neu brynu busnes? Pa un sydd orau i mi?

Starting a business tends to mean building your own company from scratch.

And indeed, that’s precisely what many business start-ups do.

The alternative option is to purchase a going concern ‘off-the-peg’ and mould it in your own image over time.

With each of these new business models, there really is no such thing as a cast-iron, ‘sure thing’.

So, let’s take a dispassionate look at the pros, cons and key differences between these alternative methods of going into business.

The Pros of Buying an Existing Business

Starting from the very beginning, it is much easier to raise the capital to buy an established business , for example, because your lender will base their risk assessment on the past performance of that business, rather than on a business projection (i.e. guess) that shows how your proposed start-up might perform in the leisure and accommodation market.

Purchasing an existing business means that, without the need to invest in set-up equipment, you can start generating a cash flow from day one.

From a trading perspective, taking on an established business gives you the advantage of selling an established brand.

The market will already understand the worth of the products or services you offer and that also gives you access to a ready-made source of customers.

Of course, you will still make decisions about your marketing strategies, but that won’t involve starting from a customer base of zero.

The same goes for your business networks. A going concern will have tried-and-trusted suppliers, marketing contacts, ongoing business contracts and more.

This still won’t prevent you from refining or refreshing your network over time, as you choose, but it saves having to assemble such contacts before you can even start to trade.

With time saved, you can move straight into devising strategies to grow your business as you would want. And with few start-up costs, it will also be easier to fund your reinvestment for growth, because you will already be earning a steady income.

Staff training will also be a more relaxed affair, because you will already have a knowledgeable team in place.

So, you can approach such matters strategically with an eye on where you want to be in the future. And overall, taking on the running of an established business is both less hard work and less risky at the outset.

The Cons of Buying an Existing Business

On the debit side, buying a seriously flawed business could be a nightmare without the right preparation.

That’s why the process of due diligence, which forensically examines and assesses any business you may be planning to buy, must be supported by a professional team.

In addition, you should of course conduct your own broader due diligence to satisfy yourself about the future prospects of the business.

At such point, you should consider what effect your future plans for the business may have upon its profitability and market profile.

But given that you are taking over someone else’s dream, there could be inherent snags which may be hard to spot.

So, as the lawyers say, ‘caveat emptor’ (let the buyer beware).

The Pros of Starting Your Own Business

Going it alone makes you the boss. You have total say about how things should be done.

For some, that feeling can be so liberating that it can drive you on to achieve great things.

And an extension of that, is getting to decide what you want to do with your working life, as well as all the ancillary questions, such as where you want to work and who you wish to work with.

So, if you have a hobby you could turn into a business, it’s can be possible to get paid for something you simply love to do.

Nevertheless, it does demand self-discipline to meet customer deadlines and other business expectations on time, every time.

But knowing it all contributes to building your business dream is a huge boost in helping you through the inevitable setbacks all new entrepreneurs will experience.

This is also a discussion about creativity, which in business often means the ability to personalise your growing company so you can differentiate it from your rivals.

Other than budget constraints, you can design and tweak all aspects of your corporate presence as you please – an opportunity rarely available to those in paid employment.

Starting a business has become easier than it once was. There’s plenty of specialist advice a budding entrepreneur can call on, and some organisations like the Prince’s Trust and some inner-city initiatives may be able to provide you with the support and contacts to get your business off the ground.

Often, each day will be completely different from the last and you’ll start to realise there’s always a fresh challenge just around the corner.

Sometimes it’s even possible to create a ‘half-way house’ – a new business you run part-time while still working within paid employment.

Whilst this certainly won’t work for everyone, it is one way to start a new business with less financial risk. But do allow for how difficult it may be to run two careers at once!

The Cons of Starting Your Own Business

Don’t underestimate the time, work and expense involved in financing and setting up a business start-up.

And after that, realise that the trading and marketing required to build up a positive reputation may take quite a while. For instance, it’s not unusual for a new start-up to trade for up to three years before making a profit.

When starting your own business, the early years are always the hardest. So, if you can weather that early period, the prospects for your mature business should start to considerably improve.

Whether you decide to buy or start a business, becoming an entrepreneur always requires lots of dedication, hard work and perseverance.

So, the message is: take plenty of time to ensure you make the right call. After all, both your personal and professional future will be defined by the quality of that decision.

By Jo Thornley, Head of Brand and Partnerships at BusinessesForSale.com


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