Description
File relating to comparing entrepreneurs founding a new venture to those taking over an existing business.
New or old?
Comparing entrepreneurs founding a new
venture to those taking over an existing
business
When someone decides to become an entrepreneur, they must also decide whether to take
over an existing business or to found a new one. For the first time in Germany, this empirical
study provides a comprehensive analysis – based on data from the KfW Start-up Monitor – of
the differences between entrepreneurs who take over established businesses and those who
launch new ventures. The core findings of the study are as follows:
- As an average over the last ten years, approx. 10 % of new entrepreneurs have taken over
an established business starting their self-employment.
- Businesses which have been taken over are, on average, larger than new ventures.
Roughly 71 % of “takeover founders” begin on a full-time basis; 68 % of them employ staff,
and 27 % start in conjunction with partners (the corresponding figures for “new start-up
founders” being: 50 %, 27 % and 13 %).
- When the business starts, takeover founders – subject to certain other characteristics of the
enterprise and the attributes of the entrepreneur – are less likely to bring new products and
ideas to the market than new start-up founders.
These results show that, in the short term, positive effects on innovation activity within the
economy are more likely to flow from newly formed businesses. The immediate contribution
which taking over an established business makes to the economy is to keep the company
going and to safeguard jobs. Over the medium to long term, however, takeover founders will
also come to make decisions on innovation activity within their company, and may change
their innovation strategy. For if nothing else, they have to survive in the market place in
competition with innovative new start-up founders.
For starting a business successfully, it is necessary for the founder to be able to finance their
venture. The following points are evident:
- Takeover founders can finance essential investments out of sales revenue more frequently,
and as a result they can manage without using material or financial resources more often
than those founding new start-ups. However, if they do need financing, they draw more
frequently on external sources of financing such as bank loans, and they need more
starting capital than those launching new start-ups.
Takeover founders experience financing difficulties with almost the same frequency as start-
up founders (17 % and 15 % respectively). Having a proven business concept, which the
capital provider will evaluate as part of the financing application process, should certainly
help avoid financing problems. On the other hand, however, the new entrepreneur – unlike
New or old? “Takeover founders” and start-up founders compared 2
the company itself – is not known to the capital provider and generally requires a
considerable financing sum. Hence open access to financing is also of key importance for
takeover founders, in order to enable existing companies to continue in business following
succession. With the increasing age of the population, the issue of business transfers is
gaining in importance, as more and more entrepreneurs seek successors for their
companies.
doc_702431053.pdf
File relating to comparing entrepreneurs founding a new venture to those taking over an existing business.
New or old?
Comparing entrepreneurs founding a new
venture to those taking over an existing
business
When someone decides to become an entrepreneur, they must also decide whether to take
over an existing business or to found a new one. For the first time in Germany, this empirical
study provides a comprehensive analysis – based on data from the KfW Start-up Monitor – of
the differences between entrepreneurs who take over established businesses and those who
launch new ventures. The core findings of the study are as follows:
- As an average over the last ten years, approx. 10 % of new entrepreneurs have taken over
an established business starting their self-employment.
- Businesses which have been taken over are, on average, larger than new ventures.
Roughly 71 % of “takeover founders” begin on a full-time basis; 68 % of them employ staff,
and 27 % start in conjunction with partners (the corresponding figures for “new start-up
founders” being: 50 %, 27 % and 13 %).
- When the business starts, takeover founders – subject to certain other characteristics of the
enterprise and the attributes of the entrepreneur – are less likely to bring new products and
ideas to the market than new start-up founders.
These results show that, in the short term, positive effects on innovation activity within the
economy are more likely to flow from newly formed businesses. The immediate contribution
which taking over an established business makes to the economy is to keep the company
going and to safeguard jobs. Over the medium to long term, however, takeover founders will
also come to make decisions on innovation activity within their company, and may change
their innovation strategy. For if nothing else, they have to survive in the market place in
competition with innovative new start-up founders.
For starting a business successfully, it is necessary for the founder to be able to finance their
venture. The following points are evident:
- Takeover founders can finance essential investments out of sales revenue more frequently,
and as a result they can manage without using material or financial resources more often
than those founding new start-ups. However, if they do need financing, they draw more
frequently on external sources of financing such as bank loans, and they need more
starting capital than those launching new start-ups.
Takeover founders experience financing difficulties with almost the same frequency as start-
up founders (17 % and 15 % respectively). Having a proven business concept, which the
capital provider will evaluate as part of the financing application process, should certainly
help avoid financing problems. On the other hand, however, the new entrepreneur – unlike
New or old? “Takeover founders” and start-up founders compared 2
the company itself – is not known to the capital provider and generally requires a
considerable financing sum. Hence open access to financing is also of key importance for
takeover founders, in order to enable existing companies to continue in business following
succession. With the increasing age of the population, the issue of business transfers is
gaining in importance, as more and more entrepreneurs seek successors for their
companies.
doc_702431053.pdf