Start a Company Yourself or Buy an Existing Business?

This article is aimed at potential future entrepreneurs. You may already be considering the concrete founding of a startup, or you might simply have the feeling that you want to build or shape something of your own. Startups are omnipresent in the media, with new valuation records being reported almost daily. The acquisition of existing companies is hardly discussed publicly but also offers many advantages.

At viaductus, we are in contact with many business buyers and have gathered experience in founding and building new companies. We aim to share this knowledge in this article.

What basic qualifications should I bring?

Entrepreneurs typically share traits such as curiosity, willingness to learn and work hard, and a readiness for change. These qualities are always necessary to succeed in either case.

Requirements for founding a startup

Capital to start a company (€12,500 for a GmbH, less for a UG)
A product idea for a customer group
Basic ability to implement

For example, if I want to sell isolated bamboo coffee cups, I don’t necessarily need to be able to program in Java because I can simply use Shopify. For (deep) tech startups, however, the founding team should definitely have enough know-how to build the first product themselves.

The ability to sell is also often underestimated. Especially more introverted, often technical founders (I count myself among them) tend to focus too much on the product, hoping that customers will naturally use a good product. This is—except for very few exceptions (e.g., the first iPhone, which was also heavily marketed)—simply wrong. Without good sales, the startup will fail. My personal opinion: better a mediocre product with first-class sales than the other way around. This is vital, especially in the early stages.

Relevant industry experience is helpful but not absolutely necessary. Most startups start small and grow into their tasks (more revenue, new employees, new organizational structure, new processes, etc.). For founders, this is the most exciting time and allows them to grow with the company. The faster the growth, the greater the potential learning curve.

Requirements for acquiring an existing company

In the following, we only consider companies with reasonably healthy financial data, i.e., generating revenue and profit. Acquiring companies that require restructuring is significantly more complex and will be covered in a separate article.

Capital for the acquisition. Depending on the industry and company size, this can easily require a mid six-figure sum or more. The good news: banks typically finance 50-70% of the purchase price, provided the company is profitable and has a solid balance sheet.
Industry understanding and experience are much more important here than in a startup. You need to be able to make operational decisions quickly and lead employees. Learning by doing is more difficult in this context.
Leadership experience and personality. Unlike a startup, you have responsibility for employees from day one. They want to know the direction. Of course, as the new boss, you won’t get everything right immediately, but you must be able to make decisions and bring people along.
Understanding of finance and controlling. This may sound dry at first but is vital for survival. You need to quickly develop a feel for how your decisions impact the numbers. Cash is king—this applies equally to startups and established companies.
Network in the industry. Ideally, you already have contacts with potential customers or partners. This makes your start much easier and allows you to focus on what matters.

Advantages and disadvantages of founding a startup versus buying a company

Let’s compare the pros and cons of both options:

Advantages of a startup:

You start with a clean slate and can design everything according to your vision.
Lower capital requirements at the beginning.
You grow with your tasks and can fully focus on your product and vision.
If it goes well, the return potential is enormous. A successful exit can make you a multimillionaire.

Disadvantages of a startup:

Extremely high risk. Most startups fail within the first few years.
Constant survival struggle, especially in the early phase. You are practically always in crisis mode.
Everything depends on you as the founder. Vacation or illness are out of the question in the first years.
It can take years for (financial) success to materialize—if it comes at all.

Advantages of buying a company:

The business model is established; products and services are already on the market.
There are customers and revenues from day one.
Established processes and an existing team make your start easier.
Banks finance a large part of the purchase price. Leverage effect possible.
Returns are not as spectacular as with a successful startup but are much more predictable and steady.

Disadvantages of buying a company:

High capital requirements at the start.
You need to familiarize yourself with the existing business. Much is new and unfamiliar at first.
It requires tact to win over employees and initiate changes. Not everyone likes the "new boss."
Return potential is limited. Companies in traditional industries are not rocket businesses.

Conclusion: Which path suits me?

As you can see, both paths have their pros and cons. There is no one right way. Ultimately, it depends on what fits you and your personality.

If you are the type who has ideas, likes to experiment, and needs a high degree of creative freedom, founding a startup might be right for you. But you must also be willing to jump into the deep end and bear extremely high risk.

Buying a company makes sense if you prefer proven models and want to quickly get into operational business. If you already have leadership and management experience and can leverage your network, you have a good chance of succeeding as an entrepreneur.

A combination of both is also conceivable: why not buy an established company and then develop it further with fresh ideas and new products? This way, you combine the advantages of both worlds.

No matter what you decide: entrepreneurship always involves risk. There is no guarantee of success. What counts are courage, perseverance, and the willingness to learn from setbacks.

If you are still unsure, I recommend talking to as many entrepreneurs as possible. Listen to successful startup founders as well as people who have bought companies. The more perspectives you get to know, the better you can assess what suits you.

Or simply contact us—we are happy to help you.