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Starting a business is an exciting venture that holds the promise of independence, creativity, and financial growth. But before you take the leap, there’s one pivotal decision every aspiring entrepreneur must make—a choice that can set the course for your future success or lead to potential failure. This decision involves choosing one of three directions for your entrepreneurial journey: creating something based on an existing concept, developing something entirely new, or acquiring an established business.
Each of these paths comes with its own set of challenges and opportunities, and the decision you make will form the foundation of your business. Choosing an existing concept may feel safer because of its proven market demand, but it requires standing out in a crowded space. Building something entirely new taps into innovation but comes with higher risks. Acquiring an existing business offers immediate cash flow but requires a significant upfront investment.
In 2023, over 5 million new businesses were started in the United States, according to the U.S. Census Bureau. However, reports from the Small Business Administration (SBA) reveal that only about 50% of businesses survive beyond five years, often due to poor planning or an ill-suited business model. Making the right decision at the start is not just important—it’s critical to your long-term success.
This article will explore each of these three options, weigh their pros and cons, and provide guidance on how to decide which path aligns best with your skills, resources, and goals.
Option 1: Building Something Existing
For many entrepreneurs, starting a business based on an existing, familiar concept is an attractive choice. This route involves entering markets with proven demand—such as opening a coffee shop, an ice cream parlor, or a cupcake bakery—where consumers already understand and want the product or service. The challenge here is standing out in industries that are often oversaturated with similar offerings.
What It Is
This approach entails launching a business that provides a product or service already prevalent in the market but with your own unique spin. Unlike franchising, you create your own brand, pricing, and customer experience while catering to an existing market.
For example, instead of launching just another coffee shop, you might offer specialty brews using sustainable practices or create a cozy space specifically targeting remote workers. These enhancements help differentiate your offering from the competition.
Pros
- Proven Demand: You’re entering a market where consumer interest is already established, reducing the uncertainty of launching a new concept. According to a 2024 consumer trends survey, coffee shops and bakeries remain among the top small business ideas due to their consistent demand.
- Faster Time to Market: There’s less need to educate customers about your product, which means you can focus on building awareness and customer loyalty.
- Flexibility: You retain full creative control over the branding, menu, and operations, unlike with a franchise.
- Room for Differentiation: While the market may be saturated, offering something unique—a healthier menu, customizable products, or exceptional customer experience—can help carve out your niche.
Cons
- Market Saturation: Competing in a crowded industry means you’ll face challenges in standing out. For example, there are over 37,000 coffee shops in the U.S., making differentiation crucial.
- Pricing Pressure: In saturated markets, consumers often compare prices, making it harder to charge premium rates unless your value proposition is crystal clear.
- Higher Marketing Costs: Establishing your presence in a competitive industry may require significant investment in branding, advertising, and promotional offers to attract and retain customers.
- Risk of Homogenization: Without a distinct edge, your business risks being viewed as just another option, making it harder to retain customer loyalty.
Is This Path Right for You?
This option suits entrepreneurs who want to capitalize on an existing market but are prepared to innovate and differentiate their offering. It requires a balance of creativity and market research to find your unique selling proposition (USP). For instance, ask yourself: What can I offer that others can’t? If you’re passionate about perfecting a common idea and making it your own, this path can be a rewarding choice.
Option 2: Creating Something New
For entrepreneurs who thrive on innovation and want to make their mark, creating something entirely new can be an exhilarating choice. This path involves introducing a product, service, or business model that doesn’t yet exist in the market. While the potential rewards are immense, this route requires creativity, resilience, and a willingness to navigate uncharted waters.
What It Is
Creating something new means starting a business from scratch, often driven by a unique idea or an innovative solution to an existing problem. Examples include developing a groundbreaking app, launching a subscription box for a niche audience, or inventing a product that solves a common inconvenience. Unlike entering a familiar market, this approach requires you to educate consumers about your offering and build demand from the ground up.
Pros
- Unlimited Creative Freedom: You control every aspect of the business, from the concept to the execution, allowing you to build something that reflects your vision and values.
- Potential for High Rewards: If successful, new ideas can lead to significant profits, scalability, and market dominance. Think of the meteoric rise of businesses like Airbnb or Uber, which disrupted their industries by addressing unmet needs.
- Differentiation: With no direct competitors (initially), you stand out as the first or only provider of your product or service.
- Passion-Driven Work: Many entrepreneurs find creating something new to be deeply fulfilling, as it aligns with their personal interests or mission.
Cons
- Higher Risk: There’s no proven market for your idea, so success is uncertain. According to CB Insights, 42% of startups fail because there’s no market need for their product.
- Steep Learning Curve: From product development to marketing, you’ll need to build everything from scratch, which can be overwhelming without prior experience.
- Resource-Intensive: Launching an innovative business often requires significant time, money, and effort before you see any returns.
- Customer Education: Convincing consumers to try something new can be challenging and may require substantial investment in marketing and awareness campaigns.
Real-Life Example
Take the example of eco-friendly packaging startup Notpla, which created a biodegradable material made from seaweed. While the idea was revolutionary, the founders faced challenges in convincing businesses to adopt their product over traditional (and cheaper) plastic. Today, their innovation is gaining traction as sustainability becomes a higher priority, but the journey required patience and persistence.
Is This Path Right for You?
This path is ideal for entrepreneurs who are passionate about solving problems, willing to take calculated risks, and comfortable with uncertainty. It’s particularly suited for those who thrive on creativity and innovation, as well as individuals who have the resources to sustain themselves during the development phase.
Ask yourself:
- Am I solving a real problem that people care about?
- Do I have the patience and resources to educate consumers and build demand?
- Am I willing to take on higher risks for potentially higher rewards?
Creating something new offers the opportunity to leave a lasting impact and even revolutionize an industry—but it’s a path that requires dedication, vision, and grit.
Option 3: Acquiring an Established Business
For entrepreneurs seeking a head start, acquiring an existing business can be an appealing option. This path offers the advantage of stepping into a business that already has a customer base, cash flow, and established operations. Moreover, various financing options are available to facilitate such acquisitions, making the process more accessible than ever.
What It Is
This option involves purchasing a business that is already operational. Common examples include acquiring a local restaurant, retail store, or service company, or investing in an online business such as an e-commerce store or content website. The process often includes negotiating with the current owner, securing financing, and taking over day-to-day management.
Pros
- Immediate Cash Flow: Established businesses typically have an existing customer base, which means you can start generating revenue right away.
- Proven Business Model: The business’s past performance can give you a clearer picture of its potential and reduce some of the uncertainties of starting from scratch.
- Established Brand and Reputation: You inherit the goodwill, vendor relationships, and operational systems that the previous owner built over time.
- Potential for Growth: Many businesses have untapped potential that a new owner with fresh ideas and energy can unlock. For example, adding digital marketing to a traditionally offline business could significantly boost revenue.
- Flexible Financing Options: Various lending options focus on the business’s cash flow rather than solely on personal credit, making acquisitions more feasible. Additionally, seller financing is common, where the seller provides a loan to the buyer, often with favorable terms. This arrangement can simplify the transaction process and demonstrate the seller’s confidence in the business’s continued success. Acquira
- Transition Support: Many sellers offer transitional support, including training and introductions to key clients and suppliers, to ensure a smooth handover and maintain business continuity.
Cons
- High Upfront Costs: Acquiring a business often requires significant capital. Even small businesses can cost anywhere from $100,000 to $500,000 or more, depending on their profitability and industry.
- Hidden Risks: You may inherit challenges such as outdated systems, poor employee morale, or undisclosed liabilities. Conducting thorough due diligence is critical.
- Transition Challenges: Taking over a business can be disruptive for employees, customers, and suppliers, especially if changes in leadership or operations are poorly managed.
- Limited Creative Control: While you can introduce improvements, you’re working within the framework of an established business, which may limit your creative freedom compared to starting from scratch.
Real-Life Example: Turning Around a Struggling Italian Restaurant
A husband-and-wife team owned a small Italian restaurant for over a decade in an affluent neighborhood, generating steady gross revenue of $600,000 annually. As the couple prepared for retirement, they listed the business for sale. A buyer with a background in digital marketing saw the potential for growth and acquired the restaurant for $250,000. The deal included seller financing for 30% of the purchase price and a three-month transition period, during which the former owners introduced the buyer to key customers and suppliers.
After taking ownership, the new buyer implemented the following improvements:
- Expanded Operating Hours: The restaurant previously only served dinner. The new owner added lunch hours, which attracted a fresh customer base of office workers and families in the area.
- Digital Marketing and Online Presence: The buyer created a modern website with online ordering capabilities and integrated it with delivery apps like DoorDash and Uber Eats, tapping into a growing trend of online food delivery.
- Revamped Menu: By introducing healthier options and specialty items, the new owner appealed to younger, health-conscious diners without alienating loyal patrons.
In the first year under new ownership, the restaurant’s annual revenue grew by 25%, with lunchtime service accounting for a significant portion of the increase. Online orders also contributed an additional $50,000 in revenue.
For more insights into business acquisitions, including lessons learned from recent deals, consider subscribing to View From The Tower on Substack. This resource offers valuable perspectives for both buyers and sellers navigating the complexities of business transitions.
Is This Path Right for You?
This option is ideal for entrepreneurs who want a faster route to profitability and are willing to invest in an established operation. It’s particularly suitable if you have strong management skills and enjoy optimizing existing processes.
Ask yourself:
- Do I have the capital or financing options to acquire a business?
- Am I comfortable analyzing financial statements and conducting due diligence?
- Can I navigate the challenges of transitioning leadership smoothly?
Acquiring a business allows you to skip the uncertainty of startup life and build on a solid foundation. However, it requires careful evaluation and strategic planning to maximize its potential.
Conclusion
Choosing the right path as an entrepreneur—whether building something existing, creating something new, or acquiring an established business—depends on your unique strengths, goals, and resources. Reflect on your risk tolerance, financial situation, and passion to determine which route aligns best with your vision. If you’re still unsure, take the quiz below to see where you fit and gain clarity on the best direction for your entrepreneurial journey.
Quiz: Which Business Path Is Right for You?
Instructions: Answer the following questions to determine which business direction aligns with your goals, skills, and resources. At the end, tally up your answers to see which option is the best fit for you.
1. What excites you most about starting a business?
A. Improving something familiar and proven.
B. Creating something entirely new that solves a problem.
C. Stepping into a well-oiled machine and making it better.
2. How do you feel about taking risks?
A. I prefer calculated risks with some level of predictability.
B. I’m comfortable with higher risks if the rewards are significant.
C. I want a safer option with fewer unknowns.
3. What’s your ideal timeline for seeing profits?
A. I’m willing to wait for a while, but I want a familiar market to ease the journey.
B. I know it might take years, but I’m ready to invest in the long game.
C. I’d prefer to generate revenue right away.
4. How would you describe your budget for starting a business?
A. Moderate—I can invest in branding and marketing but need to watch my spending.
B. Limited—I’m prepared to bootstrap or seek investors for a big idea.
C. Significant—I have access to financing or capital to acquire an established business.
5. How do you feel about building something from scratch?
A. I like the idea, but I prefer working within a proven market.
B. I thrive on innovation and the opportunity to create something completely unique.
C. I’d rather work with an existing framework and improve it.
Results: Tally Your Answers
- Mostly A’s: Building Something Existing
You’re best suited to take an existing concept and make it your own. Focus on standing out in a crowded market by adding a unique twist that resonates with your target audience. - Mostly B’s: Creating Something New
You’re an innovator with a high tolerance for risk and a desire to solve problems. Embrace your creativity and focus on building a product or service that can disrupt the market. - Mostly C’s: Acquiring an Established Business
You value stability and the ability to optimize existing systems. Look for acquisition opportunities with flexible financing options and growth potential. - Tied Results (e.g., A’s and C’s):
If your answers are evenly split, you might benefit from a hybrid approach. For instance:- Consider acquiring a business that allows for creative improvements, such as refreshing the branding, introducing new products, or expanding online.
- Reflect on your tolerance for risk versus your need for structure—do you lean toward the security of an established operation or the thrill of making your mark on a crowded market?
- Explore the insights shared in View From The Tower on Substack, where we delve into real-life examples of how entrepreneurs combine strategies to maximize success.