Why Do Entrepreneurs Prefer to Start Companies Rather Than Buy Them?



Why Do Entrepreneurs Prefer to Start Companies Rather Than Buy Them?

Would-be entrepreneurs favor starting their own businesses to taking over companies already in operation.

A 2012 telephone poll conducted in the 27 member states of the European Union and Brazil, China, Croatia, Iceland, India, Israel, Norway, Russia, Switzerland, Turkey, the United States, Japan and South Korea by TNS Custom Research asked a representative sample of adults: “If you currently had the means to start your own business, including sufficient funding, would you rather set up a new one or take over an existing one?” Fifty-six percent of Americans responded that they would prefer to “set up a new one,” while only 35 percent would prefer to “take over an existing business.”

The greater preference for starting a new company is consistent over time. A similar survey conducted in 2009 showed that 61 percent of Americans would rather set up a new business, while 30 percent would favor taking over an existing one. A 2007 poll found that 67 percent of Americans would prefer a start-up, while 27 percent would favor an acquisition.

The partiality for starting companies is widespread. In all 41 countries in which the 2012 survey was conducted, more respondents said they would prefer to set up a new business than would prefer to take over an existing one, though in Germany the gap was only one percentage point and in Austria it was only three.

Actual entry into entrepreneurship follows these predilections. When respondents who described themselves as being self-employed were asked how they got into business, 71 percent of Americans and 67 percent of Europeans said they started a business from scratch.

Why do you think people prefer starting a business to acquiring a business as a way to enter entrepreneurship? Is it because acquiring a small business tends to take more capital than creating a new one? Is it because people don’t know how to find the gems among existing small businesses for sale? Is it because people want to introduce a particular product or type of enterprise they think is missing in the marketplace? Or is it another reason entirely? I’d like to hear readers’ thoughts on this question.


Photo Photo via Shutterstock

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Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

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  1. As a professional architectural and real estate photographer, buying someone else’s business wasn’t even a consideration when I decided to go out on my own. First off, my style of shooting isn’t traditional, nor does it “fit in” with a broader audience base. I serve a very specific niche in my area! Second, the idea of buying someone else’s baby ( and clientele ) just feels strange to me. For me personally, business is earned through customer service, client word of mouth and quality photographs. If someone is used to another photographers shooting style and prefers that, then it’s insane to think I can just buy myself a new client base! For photographers, it’s a relationship over time.

    The new biz is run under my style, my service, my ethics and all new and established communication goes through me. I wouldn’t have it any other way.

    Obviously for someone who is running a product or is in a less personal profession, it’s a completely different story. The leadership can change without a lot of changes that the customer notices. Heck, even other photographers with a boarder market could likely pull it off.

  2. I’d prefer to start my own business than buy an existing one because starting mine would feel more like it was my baby – would completely belong to me, totally of my creation.

  3. I think it is because there is something special when you create your own business. You know that the idea is yours. Also, it feels good to have complete control over your business and not just making another person rich.

    • You also get more credit for it too ‘cos you built it up from scratch. Perhaps you learn things you wouldn’t have learnt had you bought a business. I can also see the benefit of buying one, though.

  4. I think there’s a certain charm to starting your own company that draws people to it. The initial expense of purchasing an already existing company might be prohibitive for would-be entrepreneurs, though a lot of the initial organizational work would be out of the way. Also, starting your own business gives you full control over how it develops. Each business has it’s culture and way of doing things. Building your own rather than working with a company that already works a certain way may also be a factor.

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