How to Choose: Startup versus Established Business

Buying a Business 

If you’re considering owning your own business, whether the startup route or an established business, you know one thing’s for sure—entrepreneurism is the right move for you and your career.

Identifying the right path starts with a few qualifying considerations—i.e. your current lifestyle, goals, financial situation and appetite for risk, among a few others.

Understanding how and where these two business opportunities differ is a great place to start your research.

Why an established business?

  • It’s proven. In other words, it’s a well-oiled machine that’s already working and functioning—from people to processes to operations.
  • It provides existing clientele. Much like the above, you’re stepping into existing relationships and simply maintaining and managing them. This allows you to build off of a solid foundation and quickly expand and grow.
  • It generates immediate cash flow. While the price tag of buying an established business is higher compared with a startup in some instances, buying existing clients translates to immediate revenue. Several studies show that startups, in comparison, fail within the first five years (sometimes three depending on the industry) and may or may not turn a profit in this timeframe.
  • It allows for easier financing. Given all of the above—particularly taking into consideration it’s a business already making money, (i.e. good debt)—banks and investors are more likely to fund and support it. This is especially key as startups are far riskier a venture given their uncertainty.
  • It’s less risky than a startup. More financial stability and a proven track record of continued business truly separates an established business from a startup.

 

Why a startup?

checklist with yes and no
  • You’re okay with uncertainty. Startups give entrepreneurs the ability to drive change and implement their own ideas and processes—all while building a company and processes from scratch. There’s multiple paths and opportunities to explore with no limitations, which can be exciting and fulfilling.
  • You have financial backing. A brand-new company is going to require capital to get off the ground. Knowing this, it’s critical to think realistically and have a plan B in place in terms of funding and financial support as startups can be financially unpredictable and your next paycheck isn’t a guarantee.
  • You thrive in fast-paced settings. Unlike corporations or established businesses, in some instances, you chart your—and your employees’ course. You can be fluid, flexible and agile in a startup setting and can operate (and make changes) on a dime—from operations to processes to pricing. This can be extremely compelling to customers in industries like IT & technology when products and services change so rapidly.
  • You enjoy long hours. With no established brand or industry awareness, you’re ready to put your passion, ambition and motivation to work in order to bring your ideas and company to life. In addition to this, as you’re responsible for shaping and creating the structure or shell of your company in its infancy stage, you’re ready to invest in long hours to create results—especially in the beginning.

Not sure where your skillset or background might align? Considering furthering a discussion with our broker team. Free and no-strings-attached.

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