Buying a business vs starting one

By Josh Elberg, founder of Palavir · Published · Updated

Palavir is a Michigan data and automation consultancy.

Short answer

A bought business costs about 2.87 years of its seller-stated profit up front. A new one has no profit history to pay for, but only about 35 in 100 new locations are still open after ten years.

The middle US listing asks $489,000 against $166,680 of seller-stated yearly profit. That profit often includes the owner's pay, so someone still has to do that job.

What do you pay for when you buy?

You pay for profit that already exists. Listings are priced as a multiple: the asking price in years of yearly profit. The middle US listing asks 2.87 years of the seller's stated profit (1,809 listings with a clear price and profit). The middle of each listing's own multiple is a little different from $489,000 divided by $166,680.

  • under $100,0001.97 years
  • $100,000 to $250,0002.40 years
  • $250,000 to $500,0002.66 years
  • $500,000 to $1 million2.97 years
  • $1 million to $2 million3.35 years
  • $2 million to $5 million4.10 years
  • $5 million and up5.23 years
Middle asking price in years of seller-stated profit, by asking price band. US listings, October 2026. Asking multiples, not what businesses sold for.

The multiple rises with price: 1.97 years under $100,000, 5.23 years at $5 million and up.

What do you get that a startup does not have?

  • Customers on day one, if they stay. Whether they stay after the owner leaves is the key question.
  • A record. Tax returns, bank statements and books you can check, instead of a plan.
  • A working system for orders, suppliers and staff, even if it is in the owner's head. Only 9% of US listings state the owner's weekly hours, so ask. See can you own a business without running it.
  • Something a lender can check. An SBA 7(a) acquisition loan needs 10% equity and 1.25:1 coverage, tested against the business's history. See SBA down payment and DSCR (DSCR is the lender's check that profit covers the loan payments). A startup has no history to test.

What can go wrong when you buy?

  • You overpay. You pay years of profit up front. If the real profit is lower than stated, the multiple you paid was higher.
  • The owner is the business. Of 228 listings that got a closer AI read, 0 could run with nobody in charge. Plan the handover: see the SBA 24-month seller rule and the first 90 days.
  • You inherit problems with the customers: old habits, supplier terms, unhappy staff.

What can go wrong when you start?

  • Still open after 1 year79.6%
  • Still open after 5 years50.2%
  • Still open after 10 years34.7%
US Bureau of Labor Statistics, Business Employment Dynamics, Table 7, total private sector: 677,876 establishments opened in the year ended March 2015. Establishments are single locations of any business, not only new owner-run companies, and closing is not always failure.

The group mixes all industries and includes locations opened by existing firms, so it describes how often new locations close, not your odds. We have no comparable survival figure for bought businesses, so we do not compare the two.

How do they compare side by side?

  • What you pay for

    Buy an existing business
    Existing customers, profit history and a working setup
    Start your own
    Nothing for history; you build it

  • Money in at the start

    Buy an existing business
    The price: the middle ask is $489,000
    Start your own
    Startup costs; these vary with the idea

  • Evidence before you commit

    Buy an existing business
    Seller-stated financials you can check
    Start your own
    None yet; only your plan and market checks

  • Time to first income

    Buy an existing business
    Starts at closing if customers stay
    Start your own
    May come later, as customers arrive

  • Main risk

    Buy an existing business
    Overpaying, or customers leaving with the owner
    Start your own
    No customers; most new locations close within ten years (BLS)

  • Work after day one

    Buy an existing business
    Learn the business and the owner's role
    Start your own
    Build everything, including the first customers
A summary of the trade. Deal Scout figures are US listings, October 2026; survival figures are from the BLS table above.

Which should you choose?

Buying trades money for certainty: you pay for history and take on a loan the existing profit has to cover. Starting trades certainty for money and time. If you have a skill and time but little cash, starting may fit. If you have savings or can borrow and want income sooner, buying can fit, provided you check the numbers and plan for what the owner does. See what cash reaches in the savings calculator, and what the price is on top of in how much it costs to buy a business.

What this data cannot tell you

  • These are asking prices, not the prices businesses sold for.
  • Profit is the seller's own figure. It often includes the owner's pay, so someone still has to do that work.
  • It is a snapshot of listings from October 2026, not a survey of all businesses.
  • The BLS table covers all private-sector locations and measures survival of locations, not of owner-run startups.
  • Business types come from an AI model reading each listing. Neither choice is guaranteed.

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Questions people ask

Is it better to buy a business or start one?

Neither wins in every case. Buying means paying for existing profit: the middle asking price is about 2.87 times the seller's stated yearly profit across 1,809 US listings, and you take on a loan the profit must cover. Starting can cost less up front but has no customers or record. Check the numbers and the owner's role before buying.

What is the downside of buying an existing business?

You may overpay, the seller's profit figure may be wrong or may include the owner's pay, and customers may leave with the owner. In our close reads, 0 of 228 listings could run with nobody in charge.

What is the downside of starting a business?

No customers, no proof and a long wait for income. BLS data on establishments opened in the year ended March 2015 shows 79.6% open after one year, 50.2% after five and 34.7% after ten. That table covers all private-sector locations, not only owner-run startups.

Is buying a business worth it?

It can be if the real profit is high enough to cover the loan and a person to run it. The middle US listing asks 2.87 times its stated profit. On our rough test, with an assumed loan of 90% of the price over 10 years at 10%, 89% of 1,809 listings show stated profit of at least 1.25 times the payments (not the lender's test, which uses EBITDA: profit before interest, taxes, depreciation and amortization). Seller profit often includes the owner's pay, so test it.

Is it easier to buy a business or to start one?

Buying can reach income sooner but may need more money, and the numbers need careful checking. Starting may need less money up front and more time. An SBA 7(a) acquisition loan needs at least 10% equity and 1.25:1 coverage, which a lender tests against the business's history.

What multiple do small businesses sell for?

We measured asking multiples, not sale prices. The middle asking multiple for US listings is 2.87 (price in years of profit), from 1.97 under $100,000 to 5.23 at $5 million and up. Asking prices are what sellers want, not what buyers paid.

Sources and method

  • Palavir Deal Scout: 3,928 US businesses-for-sale listings, 1,809 with a clear price and profit, October 2026, from nine marketplaces and brokers (scope: US listings). Asking prices and seller-stated profit. Repeats, ranges, sold listings and near-identical template listings from broker networks removed. Close-read figures are from the 6,104-listing study.
  • US Bureau of Labor Statistics, Business Employment Dynamics, Table 7: Survival of private sector establishments by opening year. Cohort: year ended March 2015, 677,876 establishments; 79.6% after 1 year, 50.2% after 5, 34.7% after 10. Read October 27, 2026.
  • SBA, SOP 50 10 8.1 (issued by SBA Information Notice 5000-880695; effective October 1, 2026), Appendix 15.

General information, not financial, legal or lending advice.