What Are the Advantages of Buying a Company Compared to Starting a New One?

Immediate Revenue Generation Instead of a Dry Spell

One of the biggest challenges in startups is the often lengthy ramp-up phase, during which costs are incurred but sufficient revenue has not yet been generated. This phase can last several months or even years depending on the industry and requires significant financial reserves or external financing.

When acquiring an established company, this dry spell is largely eliminated. A functioning business model is already in place and generates revenue from day one. Existing customer and supplier relationships ensure stable cash flows, significantly improving financial planning and reducing the risk of early failure.

This aspect is particularly relevant for individuals transitioning from employment to self-employment who cannot or do not want to forgo a regular income for an extended period. The financing of business succession is also considerably facilitated by the existing earnings, as banks can use historical figures as a basis for their lending decisions.

Established Market Position Instead of Market Entry Barriers

Building a recognizable market position is often one of the greatest hurdles for startups. Many industries have significant market entry barriers such as high capital requirements, economies of scale of established competitors, regulatory demands, or customer loyalty to existing providers.

An existing company has already overcome these hurdles and holds an established market position. It features:

A well-known brand and established name in the market
Existing customer relationships and references
Established sales channels and networks
Streamlined processes and structures
Recognized quality standards and reputation

These non-financial factors represent considerable value that would have to be painstakingly built over a long period in a startup. Especially in saturated markets with strong competition, acquiring an established company can provide the decisive advantage needed to gain a foothold at all.

Qualified Employees Instead of Difficult Recruitment

In times of skilled labor shortages, recruiting qualified employees is a central challenge for many companies. In a startup, you face the task of building an entire team from scratch—a time-consuming and costly process with an uncertain outcome.

When taking over an existing company, you typically acquire a well-coordinated team with:

Industry-specific know-how and experience
Established workflows and internal communication
Relationships with customers, suppliers, and partners
Knowledge of products, services, and market conditions

This second management level can represent significant value, especially if the new owner lacks comprehensive industry experience. Team continuity also facilitates the transition and reduces the risk of losing important customers or partners due to uncertainty.

However, successful transition requires careful employee management after the acquisition. The successful integration of employees post-acquisition demands sensitivity, clear communication, and an appreciative approach.

Existing Operating Assets Instead of High Initial Investments

Starting a company requires substantial initial investments in operating assets, machinery, equipment, IT infrastructure, and premises. These investments must be made before the first revenues and significantly increase financial risk.

In a business acquisition, these operating assets are already present and functional. This includes:

Machinery and technical equipment
Business premises and, if applicable, real estate
Vehicle fleet and logistical infrastructure
IT systems and software
Inventory and goods

The valuation of fixed assets is an important aspect of purchase price determination. In many cases, fixed assets contain hidden reserves that increase the actual value beyond the book value. Conversely, deferred maintenance can reduce value and should be considered during price negotiations.

Overall, the existing operating assets significantly reduce the initial capital requirement since not everything has to be newly acquired. Additionally, the assets are already coordinated and integrated into functioning processes.

Proven Business Model Instead of Uncertain Market Tests

In a startup, the business model initially relies on assumptions and hypotheses. Despite careful market research and business planning, there remains a significant risk that the concept will not be accepted by the market as expected. Many startups fail precisely at this point—they do not find a product-market fit.

An existing company has already passed this critical test. It has:

A proven, market-accepted business model
Validated products or services with confirmed demand
Known and stable margins and cost structures
Established operational workflows and optimized processes
Data and experience regarding market development

This certainty significantly reduces entrepreneurial risk. Instead of testing a completely new concept, the buyer can focus on optimizing and further developing a functioning model. This does not mean innovation is impossible or unnecessary—in fact, succession as an innovation driver can be a key success factor, but innovation builds on a solid, proven foundation.

Existing Customer Relationships Instead of Difficult Customer Acquisition

Acquiring new customers is one of the most costly and time-consuming activities for a young company. In many industries, customer acquisition is the critical bottleneck for growth and success.

When acquiring an existing business, you gain access to an established customer base with:

Existing contractual relationships and regular orders
Established pricing structures and payment agreements
Known contacts and personal relationships
Customer data and insights into buyer behavior
Reference customers for further acquisition

The ability to build on and develop this customer base represents a significant competitive advantage. The costs of retaining existing customers are generally much lower than those for acquiring new ones.

For a successful transition of customer relationships, careful communication and some continuity are essential. Many sellers therefore remain available as advisors after the sale to stabilize customer relationships and ensure a smooth handover.

Better Financing Options Instead of Limited Capital Access

Access to capital is often severely limited for startups. Banks are cautious about financing startups because no historical data exists and the risk is considered high. Investors and capital providers often demand high risk premiums or equity stakes in startups.

Financing an existing business acquisition is generally easier to structure:

Historical financial data demonstrate earning power
Existing assets can serve as collateral
Special funding programs support business succession
Seller financing can bridge financing gaps
Bank loans are easier to obtain with proven earnings

Particularly attractive are options like the KfW Entrepreneur Loan or ERP funding, which are specifically designed to support business acquisitions. Solutions also exist for buyers with limited equity, as described in the article Buying a Business with Almost No Equity.

Better financing options often enable the acquisition of larger and more established companies than could be founded with the same equity capital.

Succession Challenges as an Opportunity for Buyers

An important structural factor favoring acquisition over startup is demographic development in Germany. In the coming years, thousands of companies will be handed over because current owners are reaching retirement age and have no successors within the family.

This succession challenge in the German Mittelstand offers excellent opportunities for prospective buyers. Many of the businesses to be acquired are:

Financially solid and profitable
Technically well-equipped with modern equipment
Operating in niche markets with stable demand
Equipped with a loyal customer base
Available at fair prices due to increasing seller time pressure

This situation creates a "buyer’s market," enabling prospective entrepreneurs to choose from various options and negotiate favorable terms. The success guarantees in business search increase accordingly.

Reduced Risk Through Better Predictability

Entrepreneurial activity is always associated with risks. The decisive difference between a startup and an acquisition lies in the predictability of these risks.

In a startup, many experience-based data points are missing:

What are the actual operating costs?
How long until profitable growth is achieved?
What unforeseen problems may arise?
How will the market react to the new offering?

In an acquisition, concrete data and experience are available:

Historical financial figures over several years
Known cost structures and earning potentials
Documented processes and procedures
Experience with seasonal fluctuations and market cycles

This better data foundation enables thorough due diligence and a more realistic assessment of opportunities and risks. With the right negotiation strategies for buyers, guarantees and assurances can also be agreed upon to further reduce risk.

Of course, this does not mean that an acquisition is risk-free. There are also typical pitfalls in business acquisitions to avoid. But the risks are more assessable and often can be mitigated through appropriate contractual arrangements.

Growth Potential Through Optimization Instead of Building from Scratch

An often underestimated advantage of business acquisition lies in the potential for rapid growth. While a startup must first build basic structures, an acquired company can be directly optimized and further developed.

Typical growth levers in acquired companies include:

Modernizing outdated processes and technologies
Accessing new customer groups or markets with the existing offering
Expanding the product or service portfolio for existing customers
Implementing modern marketing and sales strategies
Optimizing cost structures and increasing efficiency

Especially digital transformation as a value driver offers significant potential in many acquired companies. The combination of a solid, established business model with modern digital approaches can lead to impressive growth momentum.

For strategically oriented buyers pursuing a buy-and-build strategy in the Mittelstand, acquiring established companies also provides an excellent foundation for further inorganic growth through add-on acquisitions.

Leveraging Economies of Scale from Day One

Another practical advantage of business acquisition is the ability to leverage economies of scale from the outset. While a newly founded company typically starts small and grows gradually, an acquisition allows entry at a higher level immediately.

These economies of scale include:

Better purchasing conditions through higher volumes
More efficient use of resources and infrastructure
Stronger negotiating position with market partners
Larger team with specialized expertise
Broader product or service offering

Especially in industries with intense price competition or high fixed costs, these economies of scale can be decisive for competitiveness. A startup would first have to reach a critical size to realize similar advantages—a process that can take years.

Making the Right Decision: Buy or Start?

Despite the many advantages of acquiring a business, it is not always the best choice in every situation. The decision between buying and starting a company should be carefully considered and depend on various factors:

When is an acquisition particularly advisable?

If you have management experience but limited specific industry knowledge
If you want to quickly enter a profitable business
If you need access to an established customer base
If you want to operate in an industry with high entry barriers
If you want to benefit from an experienced team
If you want to facilitate financing through existing cash flows

When might a startup be the better choice?

If you want to implement a completely new, disruptive business model
If you want to start without "legacy" and established structures
If no suitable acquisition candidates are available in your target industry
If you need to start with very low capital and grow gradually
If your concept is based on novel technology or methods

The question Start or Buy a Business? should therefore not be answered in general terms but in the context of the individual situation, personal skills and goals, and specific market conditions.

Conclusion: The Strategic Advantage of Business Acquisition

Acquiring an existing business offers aspiring entrepreneurs a variety of strategic advantages over starting from scratch. From immediate cash flows and established market positions to experienced teams and existing operating assets—a functioning company provides a solid foundation for entrepreneurial success.

Especially in the current environment, with demographic-driven succession shortages and a broad supply of businesses available for acquisition, buyers face a historically favorable opportunity. Improved financing options through special funding programs and alternative financing forms further ease market entry.

With proper preparation, thorough due diligence, and professional support, business acquisition can be the royal road to self-employment—with reduced risks and accelerated success. The checklist for buying a business offers valuable guidance to ensure no important aspects are overlooked.

If you are considering acquiring an existing business, use our platform to find suitable offers and benefit from our expertise in business acquisitions. We accompany you on the path to becoming a successful entrepreneur—from initial interest to successful takeover.