The pros and cons of starting a new business

On Behalf of | Jan 18, 2019 | Business Formation | 0 comments

For various reasons, some Illinois entrepreneurs will find it more attractive to buy an existing business than to build a new operation from the ground up. However, there are solid rationales to put your time and resources into forming a new business. If you understand the challenges involved in starting a new business as well as the benefits, you can make an informed decision.

Buying an existing business is beneficial in that you can inherit a qualified workforce and an operation that makes a healthy profit margin. But as Incfile points out, if there are problems with the workforce, such as lazy employees, you may have to root out the bad apples, even if it creates some anxiety among the existing workers who wonder if they are next to go. Also, if the company is not doing well, you will have to invest time and resources to shore the outfit up.

Starting your own business also gives you a clean slate to build the operation as you see fit. You are not inheriting the workforce of an existing business. Instead, you can hire the people you want from the very start and create your company culture from the ground up. You are not faced with altering or changing the culture of a company to fit your personal values or ethical beliefs.

Creativity is another factor. Some people feel personal satisfaction from starting their own business and trying to make it work. Putting in the effort to hire people, devise strategies, create products and services, and forge business growth are activities some entrepreneurs enjoy and thrive on. They even prefer the risk of a new business to keep them on their toes.

As FindLaw points out, new businesses are still a big risk. A report by the Small Business Administration (SBA) found that 75 percent of businesses fail in their first year. If new businesses survive into the second year, 25 percent of them will not make it. New companies also face financing challenges, as many of them do not attract outside capital and are financed by the personal assets of the owner. Often, many new businesses do not have the financing they need.

Personal drive is also important. You are responsible for creating the structure of the company and making it function. You may have to put in long hours and eschew vacation time in order to get your enterprise up and running. Additionally, if you are not familiar with business and tax laws that pertain to your business, seeking out a knowledgeable business attorney who can guide you through state and federal law might be necessary to make sure your outfit passes legal muster.