Building vs Buying a Business

Have you ever considered the difference between creating an organization from scratch and the convenience of stepping into an established business? The age-old debate between building and buying a business is a complex one, with so many things to consider. As someone who's navigated both, I’ll share my opinions, insights, and a sprinkle of wisdom to highlight the pros and cons of each option.

Over the last four and a half years, I have been involved with buying or building four businesses. Most of these have been successful, and some not as much – although each has taught me many lessons that have benefited me, our team, and our clients for years to come. I love to joke that I earned my degree in the school of hard knocks! In all reality, I have a degree in accounting and finance, a master's in business administration, and quite a few years of experience in the industry. All of these factor into my decision-making on this topic.

From a tangible perspective, let's start with sales, finance, and operations. Buying a business offers a head start by inheriting an existing customer base and established brand recognition, potentially leading to quicker financial success. However, there's a risk of inheriting strategies and problems that limit your creative input. On the other hand, building a business allows you to align sales strategies with your vision, although demanding more effort and time before becoming profitable.

In terms of finance (my personal favorite!), buying a business means immediate cash flow and established financial records. Like a cake from the bakery - you pay a premium, but it’s already baked and ready to serve. Yet, unexpected costs or liabilities could be lurking. Conversely, starting from scratch might require less initial capital but involves longer periods before turning a profit and inherent startup uncertainties.

Regarding operations, buying an established business stepping into a functional setup but may come with resistance to change or outdated processes. Building your own business allows you to design processes but it requires time and patience to refine them.

When considering intangible aspects like branding, people, and culture, building your own business gives creative freedom and a chance to shape a brand that reflects your core values, even though it's time-consuming. Starting from scratch means every color, font, logo and message speaks your language. Your business reflects YOU. Often what you put out there is what you attract in terms of branding. For example, at Light, we are a faith-forward organization. Because of this, a lot of the clients we attract (yet not all) have similar values. Buying a business offers a ready-made brand. You inherit a reputation, leveraging the time-tested results that come with it (good or bad). When Melissa Marshall and I purchased the Dale Carnegie of ND & MN franchise last year, we inherited their global, trusted, long-standing reputation built around integrity and empowerment which has been a positive for us. However, this isn’t always the case when buying a business.

In terms of people, building a business lets you form a team that grows with the business, establishing practices and a sense of ownership. These folks grow from collective successes and mistakes. Buying a business means inheriting a team with its expertise and established ways of doing things, which could create resistance to change and clash with new values.

Regarding culture, building a business lets you establish and shape the culture according to your mission and core values, representing the very heart of your organization. Buying a business means adapting to an existing culture, which might involve reinventing aspects that don't align with your values, posing challenges in changing ingrained behaviors. You may offer the best product or service on the market, but if your culture is bad, it will be difficult for your business to be successful.

Ultimately, in my opinion, buying a business is the better option regarding the tangible factors due to faster financial success. However, building a business wins in intangibles, like aligning your brand and culture with personal values. The choice between building or buying a business is highly subjective and depends on your own unique skill set and desires - there is no one-size-fits-all approach. I would encourage you to take your time and surround yourself with experts while makinga decision of this magnitude. For a deeper dive into this subject and the four businesses I am a part of, check out our webinar: Building vs Buying a Business.