Buying Companies Instead of Starting Them – The New Trend 2025

The dream of entrepreneurial independence does not necessarily have to begin with a startup. In fact, acquiring an existing business offers numerous strategic advantages that can significantly ease the transition into self-employment. While starting from scratch may seem appealing with its "clean slate" character, a sober assessment often reveals that the benefits of a takeover outweigh those of a new foundation. This article explores why buying a business can be the smarter path to entrepreneurship and highlights the key aspects to consider.

The Key Advantages of a Business Acquisition

Purchasing an established company offers numerous strategic benefits compared to starting a new business, greatly increasing the likelihood of entrepreneurial success.

Immediate Cash Flows Instead of a Long Dry Spell

The most obvious advantage lies in the immediate revenue situation. While new founders often need years to reach the break-even point and generate a sustainable income, an existing business generates sales from day one. These established cash flows not only secure a stable personal livelihood but also significantly facilitate obtaining loans and financing the purchase price.

Acquiring a functioning business model also substantially reduces the risk of entrepreneurial failure. While startups often have a success rate below 50%, existing companies have already demonstrated their "proof of concept." The market viability of the business model is no longer a theoretical assumption but a proven fact.

Existing Team and Expertise

Another invaluable advantage is the existing team with its concentrated expertise. Especially in times of skilled labor shortages, taking over well-coordinated employee teams is invaluable. The staff know the operational processes, customers, and industry specifics—knowledge that a founder would have to acquire laboriously and time-consuming.

Particularly valuable is the second management level, which ideally assumes independent responsibility and supports the transition to the new owner. However, successful employee management after the acquisition requires sensitive handling of the team and transparent communication.

Established Market Position and Customer Relationships

Building a customer base is one of the biggest challenges for new founders. When acquiring an existing business, you take over an established customer base and proven customer relationships. This existing foundation of trust is a decisive advantage that can make the difference in competition with established market players.

Additionally, you benefit from the company's market position and brand recognition, which a new founder would have to build over years. Existing market access channels, sales structures, and partner networks significantly accelerate entrepreneurial success.

Existing Infrastructure and Operating Assets

In a startup, all operating assets must be newly acquired, requiring substantial investment. In contrast, an acquisition includes a functioning operational infrastructure—from machinery and IT systems to business premises. This significantly reduces initial capital requirements and enables a smooth start.

The valuation of fixed assets is an important aspect of determining the purchase price. In many cases, fixed assets contain considerable hidden reserves that increase the actual value beyond the book value.

The Demographic Opportunity: Succession Challenges in the Mittelstand

Demographic developments in Germany have created a unique situation offering exceptional opportunities for prospective business buyers. In the coming years, thousands of medium-sized companies will be transferred because owners are reaching retirement age and have no successors within the family.

According to estimates by the Institute for SME Research (IfM) Bonn, around 150,000 family businesses will be transferred by 2025. This succession challenge in the German Mittelstand presents excellent opportunities for entrepreneurs willing to take over, as many of these businesses are financially solid, technically well-positioned, and operate in niche markets with stable demand.

The increasing urgency on the seller’s side can also lead to more attractive conditions for buyers—whether through moderate purchase prices or seller-friendly financing models such as earn-out agreements or seller loans.

Ways to Finance a Business Acquisition

One of the biggest hurdles in buying a company is financing the purchase price. However, there are creative solutions and numerous support options that can ease the entry.

Financing with Little or No Equity

The question of whether a business can be acquired without equity is frequently asked. In fact, there are ways to buy a company with little equity or even almost without equity. Possible approaches include:

• Seller financing with deferred purchase payments
• Use of mezzanine capital such as subordinated loans
• Earn-out agreements with performance-based purchase price components
• Management Buy-In with multiple partners to distribute the financing burden
• Search funds as an innovative financing form

Despite these options, a solid equity base remains ideal—the larger the equity share, the more stable the financing and the greater the entrepreneurial flexibility after the acquisition.

Subsidies and Public Support

Especially for business succession, there are numerous subsidy programs that can significantly facilitate the purchase. Particularly relevant are:

• The KfW Entrepreneur Loan with favorable interest rates and long terms
• ERP funding programs for business succession
• Guarantee programs from guarantee banks to secure bank loans
• Regional economic development programs in structurally weak areas

Combining various funding instruments can significantly reduce equity requirements and lower monthly burdens from interest and principal repayments to a manageable level.

Traditional Bank Financing and Its Requirements

Despite all alternative financing forms, traditional bank financing remains a central component in most business acquisitions. For successful financing with loans, the following aspects should be considered:

• Banks typically expect an equity share of 20-30%
• A convincing business and integration plan is essential
• Adequate collateral must be available for loan approval
• Sustainable debt service capacity must be demonstrated through stable cash flows

The combination of bank loans, subsidies, and alternative financing components often enables a tailored and viable financing structure.

Who Is Business Acquisition Especially Suitable For?

Buying instead of founding is not the right path for everyone. This approach is particularly suitable for:

Experienced Managers and Professionals with Industry Knowledge

Experienced professionals and executives who want to apply their know-how and management skills to self-employment are ideal candidates for a business acquisition. They bring valuable industry knowledge and can competently assess and further develop existing structures and processes.

The question Do I have what it takes to buy a business? should be answered honestly. The necessary entrepreneurial skills sometimes differ from those of an employed manager.

Career Changers with Complementary Skills

Also, career changers without specific professional experience in the respective industry can become successful business successors. What matters is that they bring complementary skills—such as business administration knowledge, sales, or marketing expertise—and are willing to familiarize themselves with industry specifics.

In such cases, it is especially important to retain existing skilled personnel and ensure a smooth handover with the previous owner. Ideally, the latter remains available in an advisory capacity during a transition phase to ensure knowledge transfer.

Founder Teams with Diverse Competencies

Acquisition by a team of founders with different professional backgrounds can be particularly promising. This allows optimal combination of business, technical, and industry-specific competencies. Moreover, the financial burden is shared among several shoulders, reducing the equity requirement per person.

Success for such teams depends on clear task and responsibility allocation as well as transparent shareholder agreements to avoid later conflicts.

The Path to a Successful Business Acquisition

The process of buying a business typically follows a structured sequence that should be carefully planned and executed.

Systematic Search for the Right Acquisition Candidate

Finding the right company is the first crucial step. Besides traditional channels like business exchanges and broker offers, direct approaches are also possible. Defining clear criteria regarding industry, size, location, and purchase price is central.

The question of how to recognize unserious sellers should always be kept in mind to avoid wasting time and financial risks.

Thorough Due Diligence as the Basis for the Purchase Decision

After identifying a potential acquisition target, a thorough examination of all relevant aspects follows within the framework of due diligence. This includes:

• Financial due diligence to review the financial situation
• Legal due diligence for legal aspects
• Commercial due diligence to assess the market environment
• Tax due diligence for tax risks

The costs of due diligence should be viewed as a necessary investment in one’s own security.

Realistic Business Valuation and Purchase Price Negotiation

A sound business valuation is crucial for successful purchase price negotiations. Common methods include:

• The multiplier method based on EBITDA multiples or revenue multiples
• The asset-based valuation method for asset-intensive companies
• The DCF method for a forward-looking valuation

Non-financial factors such as market position and future prospects should also be considered. A common pitfall is excessively emotional price expectations on the seller’s side, which must be overcome through sensitive negotiation.

Structured Integration After the Purchase

After successfully closing the transaction, the critical phase of integration and leadership takeover begins. The first 100 days are crucial for long-term success. Especially employee management after the acquisition and cultural integration require tact.

A structured integration plan that addresses both operational and cultural aspects is key to success in this critical phase.

Special Acquisition Situations and Models

Depending on personal circumstances and the type of target company, various acquisition models are available:

Management Buy-In (MBI) as a Classic Route for External Executives

In a Management Buy-In (MBI), an external executive takes over a company together with financial partners. The checklist for Management Buy-In outlines the key steps of this process. The advantage: The financial burden is shared, and different competencies can complement each other.

To attract attention as an MBI candidate, clear positioning with proven successes and convincing future visions is essential.

Search Funds as an Innovative Acquisition Model

Search funds are an innovative model for business acquisition, originally from the USA. Here, an entrepreneurial "searcher" raises capital from investors to specifically look for a suitable company, buy it, and manage it long-term as CEO.

The special financing structure of search funds makes this model particularly interesting for talented managers with limited equity. The success prospects are promising with careful company selection and professional due diligence.

Industry-Specific Particularities

Depending on the industry, special conditions and success factors apply to acquisitions. Examples include:

• IT companies with their specific multiples and valuation criteria
• Car wash businesses with their location-dependent success factors
• Funeral homes with their special value-enhancing factors

Industry-specific preparation and ideally support from experts with relevant experience are particularly valuable here.

Succession as a Driver of Innovation – The Best of Both Worlds

Using succession as a driver of innovation combines the advantages of an acquisition with the innovative potential of a startup. The new owner can build on the solid foundation of the existing business model while simultaneously introducing fresh impulses for the company’s future viability.

Particularly, the digital transformation offers significant potential here. The digitalization of SMEs with AI and other modern technologies can significantly enhance the competitiveness of existing business models.

Sustainable business practices are also gaining importance. The company value can be increased through sustainable management, which becomes especially relevant in later resale. The integration of ESG criteria is increasingly becoming a value driver in business sales.

Conclusion: The Smart Alternative for the Path to Self-Employment

The decision between starting or buying a business should be well considered. Buying an existing company offers numerous strategic advantages that facilitate the path to self-employment and significantly increase the likelihood of success.

From immediate cash flows and established teams to proven market positions—the acquisition of an existing business enables a "flying start" into entrepreneurship. Demographic developments in Germany further enhance these opportunities, as many solid medium-sized companies seek successors.

Although the capital requirement initially appears higher than for a startup, innovative financing models, subsidy programs, and seller-friendly structures like earn-outs offer many ways to finance the entry—sometimes even with minimal equity.

Thus, buying a business is not just an alternative to founding a company but often the far more promising path to entrepreneurial independence. Those who approach the process systematically, prepare thoroughly, and seek professional support can optimally leverage the opportunities of business succession and fully realize their entrepreneurial potential.