As an entrepreneur, you are ready for the next step: expanding your business. But what is the right approach? Will you build something new yourself, or is it better to take over another business?
You want to grow your business, for example by expanding into new markets or appealing to a larger customer segment. In that case, you have two options: you can choose to start a new business yourself, or you can acquire an existing business.
Reasons to take over a business
Taking over a business is not a simple decision, but a conscious choice. One of the main reasons for acquisitions is to expand your business. Typically, two types of acquisitions aimed at expansion can be distinguished in the market: horizontal and vertical. Horizontal acquisition is an acquisition where you take over a direct competitor or a player in a similar sector. Here you can gain additional market share, or increase geographic coverage. Vertical acquisition is one in which you acquire a business higher or lower in the production or service chain. Its purpose is to gain access to suppliers, production or distribution.
Another important driver for acquiring a business is realizing synergy benefits. Joining forces can create value that would not be attainable separately. Synergy can come about through operational advantages, such as working more efficiently by sharing resources and knowledge, and through financial advantages, through a stronger combined position and better access to capital. In addition, synergy can come about through strategic advantages, which are created by combining complementary skills, leading to a stronger market position and new growth opportunities.
There may also be other motives for acquiring a business, such as gaining access to new customers, reducing or eliminating competition, or diversifying service or product offerings.
Setting up a new business yourself
In addition to taking over a business, you can also choose to build a new business yourself. This allows you to build something completely according to your own vision: you choose the name, the product, the target group and the direction. This offers a lot of freedom and flexibility, especially in the early stages. Also, initial costs are often lower than with an acquisition, because you don't pay directly for existing revenue, customer base or ownership. On the other hand, you have to build everything yourself: from brand awareness to market share. Therefore, this route usually requires more time and effort, with no immediate stable income.
Why take over an existing business and not start something new yourself?
Setting up a new business yourself is therefore not always the most efficient choice. In addition to the aforementioned reasons, there are a number of other benefits associated with taking over an existing business. For one, you step directly into an organization that is already running and you skip the time and costs involved in starting up a business.
Furthermore, this way you can take over the reputation and brand value of an existing business, as well as the existing clientele. In addition, financing can be easier than starting from scratch. Finally, in an acquisition you usually take over (part of) the staff, including valuable knowledge, experience and relationships.
What is the right choice for you as an entrepreneur depends on your situation. Whatever route you choose: being well prepared is the key success factor.
