Yes, I get it…the idea of starting your own business and turning your unique vision into reality is exhilarating. Especially if you are currently working crazy hours or you are just tired of corporate life and want to move into a flexible path where you can be your own boss.
However, according to the U.S. Bureau of Labor Statistics, about 20% of new businesses fail within the first year, and only about half survive for five years or more. The failure rate is even higher for e-commerce businesses- 80–90% of e-commerce go belly up before their first birthday. When buying an already existing e-commerce business, you have an edge over starting a business because you have already seen how viable the business model is and easily improve it to increase sales and profitability.
However, not all business models are viable, you could still buy a business and still end up failing at it. Let’s explore the pros and cons of buying vs. starting an e-commerce business to help you decide which is right for you.
Is Buying an Existing Business Better Than Starting One?
What Are the Main Advantages of Buying an Existing Business?
Reduced risk: When buying an existing business, you are acquiring a proven concept, a loyal customer base, a stable cash flow, and an established reputation. All of these factors help to mitigate the volatility and risk associated with starting a business, particularly in the early stages.
Easier financing: Lenders and investors are more likely to finance a business that has a track record of success and profitability than a new venture with no history or guarantees. Buying a business provides you with inventory, assets, and other track records that allow investors and lenders to trust you enough to give you money to scale the business.
Faster growth: When buying a business you skip the initial hurdles of being a startup — no need to spend time building a customer base or fumbling with marketing strategies. You can effortlessly skip to finding opportunities to scale up the business.
Experienced staff: You could also inherit the original team when you buy a business. This allows you to get a team who’ve already navigated the ups and downs of the industry and have mastered it- this is a shortcut to success no training manual can match.
What Are the Disadvantages of Buying an Existing Business?
Buying an existing business is not without its drawbacks. The following are its major disadvantages:
High cost: Buying existing businesses isn’t always a budget-friendly shortcut. Yes, you get to bypass the initial startup costs, but you will most likely through the roof for the existing customer base, brand recognition, and intangible assets like goodwill. So, while buying saves you time, it can be pricier than starting fresh.
Hidden problems: Buying an existing business isn’t just inheriting customers and cash flow, you might also inherit some of the seller’s baggage such as unpaid taxes, lingering lawsuits, or even disgruntled employees. So, make sure to do your due diligence to uncover any hidden skeletons before you buy any business.
Loss of control: Buying a business also means handing over some control. You might inherit franchise agreements, supplier contracts, or even employee contracts. You have to be ready to navigate these pre-existing limitations and find innovative ways of implementing your vision.
Cultural clash: Buying a business is like merging families — it takes time, patience, and a willingness to understand different perspectives. You will need to adjust your expectations, and collaboration style, and maybe even navigate some cultural clashes.
Is It Better to Start Your Own Business?
A major advantage of starting your business is that you have control over the business. You can choose what to do, when to do it, and how to do it. You can also pursue your passion and creativity, and create something that reflects your values and vision. For example, if you are thinking of starting an e-commerce business around cake-making tools, you can experiment with different brands of cake tools rather than sticking with a specific supplier because of an existing supplier contract.
Another advantage of starting your business is that there is no hidden baggage, you are starting on a clean slate. You start and run the business without worrying about shady contracts, negative brand reputation, ongoing legal disputes, etc.
However, starting a business also comes with its challenges and risks. You have to invest a lot of time, money, and energy into your business with no guarantee that it will succeed.
You also have to deal with all the hurdles that come with running a new business, such as finding customers, managing employees, complying with regulations, and competing with other businesses. All these steps can be overwhelming, especially if this is your first time running a business.
How to Decide Whether to Buy or Start a Business
There are pros and cons to both buying or starting your business, and the best choice depends on various factors, such as your goals, skills, resources, and risk tolerance. Let’s look at some qualities that will help you decide whether to start or buy a business:
When to Buy an Existing Business
You crave stability and predictability: Buying a business, especially one with a loyal customer base provides you with a solid financial footing. Yes, you may still need to find ways to increase profitability, but you’ll still have a steady revenue stream from your existing customers.
You’re a management expert: If you are great at optimizing business operations, managing finances, and team leadership, buying and scaling up a business would be the right fit for you.
You’re not a product or service innovator: Not everyone is an innovator, if you’re more comfortable refining existing products or services rather than creating entirely new ones, then buying a business may be the right move for you.
You want a faster path to profitability: Building a business from scratch can take years to reach profitability. You don’t have to struggle with this when buying an existing business with a proven revenue stream.
When Starting a Business Makes More Sense
You’re a hands-on builder: If you’re passionate about creating things from scratch, you’ll love starting your own business. It’ll give you the freedom to do what you love and make a profit while at it.
You’re a visionary innovator: If you’re brimming with groundbreaking ideas and a passion for disrupting industries, starting a business would allow you to bring your vision to life. It enables you to create game-changing products or services to fill a huge gap in the market and become your target audience’s favorite.
You’re willing to take calculated risks: Building a business from scratch is inherently riskier than buying an existing one. If you’re comfortable with uncertainty and have a high tolerance for risk, starting a business would be a good fit for you.
How Trend Hijacking Can Help You to Buy or Start a Successful E-Commerce Business
Trend hijacking is a proven strategy that can propel your e-commerce business to high profitability, regardless of its age.
Here’s how the trend-hijacking strategy works:
What is Trend Hijacking?
The Trend-hijacking strategy leverages the awareness and excitement surrounding viral products and marketing strategies.
How Does It Work?
Trend hijacking involves identifying trending products and then ranking your product to appear at the top of search results when people look for keywords related to those products.
According to Numero, On average, the number 1 result on SERP gets 31.7 % of traffic, while the second gets 24.71 %, and the traffic keeps going down with the search results. So, the trendhijacking strategy allows you to divert the majority of the traffic and sales of viral products to your e-commerce store without the hassle of getting lost in thousands of ads.
Here are some specific ways to use trend hijacking for your e-commerce business:
Tapping into Existing Demand: Trend hijacking leverages existing consumer demand for trending products. This eliminates the need to invest time and resources into researching and developing your own products. It also ensures that there is a ready market for your offerings, minimizing the risk of failure.
Building a Strong Brand Identity: Trend hijacking is not just about selling products; it’s also about building a strong brand identity. Trend hijacking enables you to increase your brand awareness and develop a unique brand personality that resonates with your target audience.
Reduced Marketing Costs: When using the trend-hijacking strategy, you are not advertising to a cold audience that may not be interested in your products. You are marketing to an audience that already wants your products. This helps you to cut down on marketing/advertising costs.
User Experience Optimization: When running marketing campaigns with the Trend hijacking strategy, you can review user journeys through your website to identify opportunities to improve your website navigation, design, and checkout process. This will help you to create a better user experience and a higher conversion rate.
Higher Profitability: Focusing on hot products helps you avoid stocking products your target audience isn’t interested in, reducing the risk of waste, and losses. It also helps you to spend less on ads, allowing you to keep your profit.
FAQs about Buying vs Starting a Business
What Is the Difference Between a Start-up and an Existing Business?
A startup is a business in its early stages of growth with high growth potential, looking to disrupt existing traditional business models. An existing business, on the other hand, is a business with a track record of sales, customers, brand image, and other assets.
Is It Smart to Start 2 Businesses at Once?
Starting two businesses at a time is generally not advisable, especially for first-time entrepreneurs. Starting a new business is not easy, starting 2 simultaneously is very risky- one or both businesses will likely suffer.
So, before starting a second business, make sure you have the time, resources, and experience to manage both businesses effectively.
What Kind of Business Should You Buy?
The best type of business to buy depends on your skills, capital, experience, and goals. However, here are some factors to guide you when choosing a business to buy include:
Skills and experience: Choose a business that aligns with your existing skills and experience. This will make it easier for you to manage the business and make informed decisions.
Financial resources: Choose a business that you can fund its ongoing operations. Regardless of the projected income, ensure you have enough to cover the running costs.
Fisk tolerance: Some businesses are riskier than others, go for a business that matches your risk appetite. So, if you have a low-risk appetite, go low-risk business like a digital dropshipping store. If you have a medium to high-risk appetite, you can go medium-risk businesses like physical dropshipping.
Goals: When buying a business, look for one that matches your long-term vision and goals. This will enable you to be visionary about the business and make informed decisions to grow it.
Wrapping Up
Before choosing to buy or start a business, carefully consider your strengths and weaknesses- not everyone has what it takes to run a business from the ground up, and not everyone is visionary enough to take over a business and make it way more profitable.Regardless of the decision you make, the trendhijacking strategy helps you cut down on costs, build a loyal customer base, and significantly increase your sales. Book a free call with the Trend Hijacking team to get personalized recommendations to launch/ scale your e-commerce business.
Have more questions about buying vs. starting a business? Drop a comment below, I’ll be happy to answer them. Also, if you found this post helpful and would love to see more content like this, give me a clap.
