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Starting a Business: Founding a New Company or Acquiring an Existing One?
Many entrepreneurs dream of bringing their own business ideas to life and initially consider starting a new business. But an attractive alternative is often overlooked: acquiring an existing business. Business succession offers advantages and opens up numerous opportunities that starting a new business often cannot provide. But which option is the better choice, and what should founders keep in mind?
Why Business Succession Is Becoming Increasingly Relevant
Even the baby boomers cannot escape demographic trends: A large number of German companies are facing a generational transition. According to estimates by the Institute for SME Research (IfM), approximately 30,000 to 40,000 entrepreneurs will be seeking a successor each year through 2027. These are primarily small and medium-sized enterprises (SMEs), which form the backbone of the German economy and are the foundation of prosperity in many regions.
For founders looking to get a quick start as entrepreneurs, taking over an existing company offers real opportunities and, with them, valuable time and competitive advantages: Instead of starting from scratch, they can draw on existing structures, customer bases, and networks.
Starting a New Business vs. Business Succession: A Comparison
Risks and Challenges
Starting a new business carries the risk that the business model may not work initially, that acquiring customers will be a laborious process, and that the financing base is often uncertain. In contrast, taking over an existing company offers greater security: the business model is proven, the customer base is established, and revenue—and thus financing—is predictable.Market Access
While founders of a new startup often have to invest months or years to build a reputation and establish a market position, acquirers gain immediate access to an existing network of customers, suppliers, and partners.Scope for Innovation
Many founders fear that a takeover offers less room for innovation. In fact, the opposite is true: buyers have the opportunity to further develop an existing business and transform it sustainably using the proceeds from the existing business.
Succession: Innovation Meets Stability
Acquiring an existing company opens up numerous opportunities for founders:
A stable foundation for sustainable growth: Acquirers benefit from a stable foundation on which they can build—an advantage that many startups only achieve after years.
Further Development of the Business Model: Through targeted innovations, existing niches can be captured, processes streamlined, and the company made future-proof. In addition, stable revenue from ongoing operations facilitates the financing and market launch of new products or services.
Increased efficiency: Existing and proven corporate structures can be optimized from a secure position to make the company more profitable and position it for the future.
Challenges and Financing Advantages
Of course, business succession also presents challenges: These may include, for example, an existing and highly hierarchical corporate culture that could make it difficult to integrate new management approaches.
Purchasing an existing and profitable business model also offers clear financing advantages:
Easier access to capital: The selling company’s primary banks are often more open to succession financing than they are to new startups, since they are already familiar with the business’s financial situation. If the founder can convince the bank with a robust business plan, the door to successful succession financing is wide open.
More favorable terms: Established business relationships with financial institutions can secure better interest rates and more flexible financing structures for buyers.
A Safe Alternative in Uncertain Times
Acquiring a business is a wise alternative, especially during times of economic uncertainty. While starting a new business often involves higher risks and uncertainties during crises, an acquisition offers a proven foundation with established processes and stable revenue streams. Acquirers can rely on existing assets and market positions rather than painstakingly building a new business in uncertain markets. This makes a business acquisition the safer choice for founders who want to get off to a successful start even in difficult times.
Success Factors for Acquirers: Support Throughout the Process
Successfully acquiring a business requires a structured and careful approach. This includes:
Strategic planning: Founders should clearly define their own business goals and align them with their financial capabilities and risk tolerance.
Targeted search for acquisition candidates: Based on this strategic planning, the search for a business can begin, starting with the identification of suitable companies ready for succession. This search can be conducted through marketplaces such as the DUB, a strong network, and structured search approaches by consultants specializing in business succession, such as KERN – Unternehmensnachfolge.
Due Diligence: A thorough review of the business ensures that risks are identified early on and can be addressed during purchase negotiations.
Sustainable Integration: After the acquisition, the goal is to successfully manage the business and further develop it by implementing one’s own vision. In doing so, existing strengths should be maintained and further expanded.
Founders who address these aspects can successfully implement a business succession plan. In addition, there are numerous support services offered by consultants or networks that specialize in business succession. One example is the team at KERN – Business Succession, whose specialists assist founders in finding suitable companies and guide them through the entire acquisition process, drawing on many years of transaction experience.
Conclusion: Business Succession—the Smart Alternative to Starting a New Business
For founders looking to launch their entrepreneurial journey, business succession offers a smart alternative to the traditional start-up. With lower risks, faster market access, and simpler financing options, purchasing an existing company is an attractive path to entrepreneurial independence.
Founders should assess early on whether the succession option aligns with their goals—and rely on experienced support in the process. Because one thing is clear: The opportunities are better now than they’ve ever been.
About the Author:
Ingo Claus is an entrepreneur, business administrator, business mediator, and partner at KERN – Zukunft für Lebenswerke. He facilitates generational transitions and business sales in the manufacturing industry as well as in the retail, production, skilled trades, and service sectors.
