By Admin | 14 Apr, 2020

Both have advantages and disadvantages. Let’s explore the advantages and disadvantages:

Advantages of starting a practice from scratch

Advantages of buying a practice

All of the client relationships are to be built your own right from the beginning. Already established client relationships with the seller.
Starting a business and setting up processes can be exhilarating. Tried and tested systems are in place so you can just improvise and start running almost immediately.
Focused market will be targeted to get new clients. Less risk since revenue and expense are more predictable based on practice’s history.
Staff hiring and vendor association decisions will be made by you. Trained staff and vendors are already in place, freeing up your time so you are able to focus on higher-level work.
You create your own office. You can learn from the experience of the seller.
To get the practice growing and get revenue at early stages you need to be a good sales person. Since the practice is already running there is immediate and uninterrupted flow of revenue.
There is very little capital required upfront. Financing is difficult for a new practice Financing is available for acquisitions whereas start-up financing is much more difficult to secure.

Disadvantages/risks of starting a practice from scratch

Disadvantages/risks of buying a practice

The duration from starting out work till receipt is long. There is outflow with no inflow for a considerable period of time. If the acquisition is done through external financing then it will involve repayment of debt.
Since it is new practice, professionals end up taking clients that you shouldn’t take on. There may be work that needs to be eliminated from the practice.
Businesses rarely change their professional consultants. Establishing a constant revenue stream can take a while. Unless you know the clients and the systems, you may be required to work longer hours than the previous owner worked.
You have to do everything at first. The “grunt work” can be boring and unprofitable. There may be clients or staff that needs to be terminated from the practice.
Working alone can be isolating. A bigger ship is harder to steer.

Make your decision based on score

Score each of these on a scale of 1 to 10, and then subtract the total score of the disadvantages from the advantages. Which option comes out ahead? Also, if you start a practice and decide it’s not going as quickly as you like, you can always try to buy later.