Buying vs. Building a Business: How to Evaluate the Real Costs and Risks

Viktor Andrukhiv, Co-founder of Fibermix, Savex Minerals, and Pack For Business

Having built several businesses, I’ve learned to appreciate the value of established operations. Behind a functioning company are years of decisions, negotiations, improvements, and mistakes. During periods of economic uncertainty, that experience becomes particularly valuable.

Starting a business from scratch may seem riskier than acquiring an established company. However, many businesses I’ve encountered on the market were struggling financially or operationally. Even when a company appears successful, a buyer needs to determine whether its advantages will survive a change in ownership.

Both approaches offer opportunities. Both come with risks that deserve careful consideration.

1. Advantages of Buying an Existing Business

Faster market entry. An acquisition can provide an established customer base, distribution channels, revenue, and an experienced team. If these assets remain effective after the transaction, the new owner can focus on growth rather than building operations from the ground up.

Established production and supplier relationships. When we launched our businesses, finding reliable suppliers involved considerable trial and error. We encountered inconsistent quality, slow communication, and suppliers unable to deliver the promised volumes.

Established relationships can save years of work. An operating manufacturer also provides historical data on production capacity, costs, and sales, while a new company’s projections still need to be tested in practice.

Licenses and certifications. Existing permits and certifications can accelerate market entry, provided they remain valid and cover the intended activities. In my experience, obtaining certification for European markets can take six months to a year, depending on the product. That time has a financial cost.

Brand recognition and reputation. Acquiring a business can also mean acquiring the trust it has built over many years.

For example, Ukrainian manufacturer Biosphere acquired the Austrian Alufix brand, together with a production facility in Romania and subsidiaries in four European countries. The transaction provided an established market presence and infrastructure that would have taken considerable time to develop independently.

2. Risks of Buying an Existing Business

Hidden liabilities and weak financial performance. I’ve encountered companies whose owners viewed selling as an alternative to closing the business.

Before an acquisition, it’s essential to understand the reasons for the sale and examine outstanding debts, tax risks, legal claims, and contractual obligations. Public records alone are insufficient.

High revenue doesn’t necessarily mean healthy profits. Contracts with large corporate customers may generate substantial orders while leaving manufacturers with very narrow margins.

Losing key employees. In founder-led businesses, critical knowledge and customer relationships may depend on a few individuals. Some employees may leave after the previous owner exits.

Before completing a transaction, buyers need to identify who holds essential expertise and whether those people are willing to remain.

Additional investment requirements. Outdated equipment, inefficient processes, or reputational issues may require substantial resources.

The purchase price is only part of the investment. If the new owner must modernize production, restructure the team, and rebuild customer trust, the time advantage of acquiring an established company can quickly disappear.

3. Advantages of Starting a Business From Scratch

Despite the uncertainties, building a company offers advantages that acquisitions may not provide.

Freedom to design the business model. Entrepreneurs can determine their products, positioning, operational structure, and technologies from the beginning.

In manufacturing, this means selecting equipment that meets specific technical requirements rather than adapting an existing facility. This is particularly valuable when competitive advantage depends on technologies or processes that would be expensive to introduce into an acquired business.

No inherited liabilities. A new company doesn’t carry the previous owner’s debts, unresolved disputes, or damaged reputation. Financial and operational risks still emerge, but they result from decisions made during the development of the new business.

Control over the team and growth strategy. Founders can establish management principles, recruit employees, and develop a company culture from the outset.

They can also plan the pace of investment according to available resources, accelerating growth when conditions allow or prioritizing financial stability when uncertainty increases.

4. Risks of Starting From Scratch

An uncertain path to profitability. Manufacturing businesses require investment in facilities, equipment, employees, and materials before generating stable revenue.

Even when production reaches its planned capacity, customer demand may fall short of expectations. Entrepreneurs need sufficient financial resources to cover the period before the business becomes profitable.

Building a customer base takes time. A new company must demonstrate product quality, reliability, and the ability to meet delivery commitments.

In B2B manufacturing, where customers depend on suppliers for their own operations, establishing trust and recurring orders can take years. This period must be reflected in financial planning.

Challenges in building a team. Hiring qualified professionals doesn’t guarantee effective cooperation. Employees need time to establish working relationships, while conflicts or poor hiring decisions may require organizational changes.

The founder often has to resolve these problems while simultaneously developing products, attracting customers, and establishing operations.

5. How I Would Make the Decision

I believe acquiring a business is generally safer when the buyer already understands the industry, its processes, and its commercial potential.

Industry expertise makes it easier to recognize valuable opportunities and assess operational problems. With the right knowledge, even a struggling company can become a worthwhile investment.

I know an entrepreneur who acquired a troubled business and restored its operations within six months, drawing on his industry expertise and legal experience.

Starting from scratch offers greater flexibility, particularly when the business requires a specific technology, operating model, or organizational structure. However, the path to profitability may be longer and less predictable.

Neither option guarantees success.

I would compare the total investment required, the time needed to achieve sustainable profitability, and the expertise available to manage the business.

An acquisition may save years of development, but only if the value of what you’re buying survives the transaction. Starting from scratch gives you more control over the initial structure, but you must build customer relationships, operational processes, and a capable team yourself.

Ultimately, the better choice depends on whether you have the resources, knowledge, and management capabilities to turn the opportunity into a sustainable business.