Businessmaidav Focus
Buy a Business or Start Your Own?
Succession instead of a fresh start: what speaks for buying an established firm, what speaks for founding your own, and how to compare the two soberly.
Anyone who wants to become an entrepreneur does not have to start from zero. Every year, more than 100,000 owners of small and medium-sized firms in Germany, the Mittelstand, look for a successor, many of them outside their own family. This article compares buying an existing business with founding your own, explains due diligence, valuation and types of contract in plain language, shows typical ways of financing and ends with questions for your own comparison.
Succession as an opportunity
The generational change in the Mittelstand has occupied the German economy for years. According to the SME Succession Monitor 2025 (Nachfolge-Monitoring Mittelstand 2025) by KfW Research, published in January 2026, around 545,000 of the 3.87 million German SMEs are aiming for a succession by the end of 2029, which is roughly 109,000 a year. The same survey puts the owners’ average age at just over 54.
The most popular solution, sought by 55 per cent of those planning a succession, is within the family. But a sale to outsiders is also a widespread option, at 42 per cent, along with takeovers by employees or co-owners. For people who want to run a company themselves, this is a remarkable starting point: many businesses with loyal customers, a well-established team and a proven business model are looking for someone to carry them on.
The case for buying
The biggest advantage is obvious: from day one, an existing company brings customers, revenue, a team, tried and tested processes, supplier relationships and a name in the market. Whether there is demand for the offering at all has already been answered. Banks can rely on annual financial statements from several years rather than just the assumptions of a business plan.
On the other hand, there are tasks a start-up does not face in this form. The purchase price has to be financed and is often well above the start-up capital of a new business. Established structures cannot be changed overnight, and the workforce first has to get to know the new management. Customer retention is particularly sensitive, because in small businesses many relationships are tied personally to the previous owner.
The case for starting your own
Founders shape everything themselves: the offering, brand, location, prices, company culture and the choice of the first employees. There are no inherited contracts and no habits that first have to be changed. The capital requirement is often lower, because there is no purchase price for an existing business, and many start-ups can be built up step by step, for example initially as a side business.
The price for this is time. Depending on the industry, it often takes several years before a new company achieves stable revenue, has built up a customer base and has its processes running smoothly. During this start-up phase, founders have to cover their living costs and the running expenses. Whether the market takes to their idea only becomes clear once the business is trading.
Buyers pay with money for time; founders pay with time for freedom.
Examining and valuing
A purchase is preceded by a careful examination of the company, the due diligence. It covers the figures for previous years, the contracts with customers, suppliers and landlords, the staffing situation, the condition of buildings and machinery, and possible dependencies, for example on a single major customer or on the owner’s knowledge. The articles How to read a company balance sheet and Revenue is not profit explain how to read the accounts and why profit and bank balance can diverge.
There is no official formula for the purchase price. A widely used approach is the capitalised earnings method (Ertragswertverfahren): it values a company on the basis of the earnings it is expected to generate in future, discounted to the valuation date. Auditors often follow the IDW S 1 standard of the Institute of Public Auditors in Germany (IDW). The market also works with multiples, in which a figure such as profit is multiplied by a factor customary in the industry. Such factors vary widely and are no substitute for examining the individual case.
The KfW survey also shows how far expectations can diverge: owners who want to hand over by the end of 2029 were aiming for an average purchase price of around 499,000 euros, with a median of 375,000 euros. These are the sellers’ wishes, not prices actually achieved. Buyers naturally focus more on what the business can earn in future under their management.
Share deal or asset deal
Legally, there are two basic forms. In a share deal, you buy the shares in a company, such as a German private limited company (GmbH). The company continues to exist with all its contracts, rights and obligations; only the owner changes. Under section 15 of the German Limited Liability Companies Act (GmbHG), the transfer of GmbH shares requires a notarised agreement. Because earlier obligations also remain in the company, thorough due diligence is especially important here.
In an asset deal, you acquire individual assets: machinery, stock, the customer base, trademark rights. For sole traders this is the only option, because there are no shares. Contracts generally only transfer with the consent of the other party in each case. A special rule applies to employees: if a business or part of a business passes to a new owner by legal transaction, the new owner takes over the existing employment relationships under section 613a of the German Civil Code (BGB).
Financing and points of contact
A takeover is usually financed from several building blocks. The buyer’s own equity shows the bank that they are taking on responsibility themselves. A bank loan usually covers the largest part, often supplemented by promotional loans. KfW, the German state-owned development bank, offers its own programmes for start-ups and succession, which are not applied for directly with KfW but through your main bank (Hausbank) or another financing partner, and before the project begins. If collateral is lacking, the guarantee banks of the federal states (Bürgschaftsbanken) can take on part of the risk.
A special building block is the vendor loan: the previous owner defers part of the purchase price and receives it back in instalments. This reduces the financing requirement and shows that the seller believes in the future of the business. The following example with invented, round figures shows how the blocks can fit together.
| Purchase price (assumption) | €600,000 |
|---|---|
| Working capital and handover costs | €60,000 |
| Total requirement | €660,000 |
| Equity | €100,000 |
| Vendor loan | €120,000 |
| Bank loan, including promotional loan | €440,000 |
| Total financing | €660,000 |
In this example, equity covers around 15 per cent of the total requirement, and the vendor loan corresponds to 20 per cent of the purchase price. The proportions a bank actually expects depend above all on the earning power of the business, from which interest and repayments have to be paid.
When searching for a suitable business, the chambers of industry and commerce (IHK) and the chambers of crafts (Handwerkskammern) help with succession advice and contacts. The nationwide business exchange nexxt-change, a platform run by, among others, the Federal Ministry for Economic Affairs and Energy, KfW, the Association of German Chambers of Commerce and Industry (DIHK) and the German Confederation of Skilled Crafts (ZDH), brings sellers and successors together. Listings are free, can be anonymous and are handled by regional partners such as chambers, savings banks (Sparkassen) and cooperative banks (Volksbanken).
Questions for your own comparison
Whether buying or founding is the better fit depends less on general advantages than on your own situation. The following questions help you set the two paths side by side soberly.
- How much equity do you have, and how long can you bridge a start-up phase from private funds?
- Are you more drawn to developing something that already exists or to building from scratch?
- Do you know the industry well enough to assess a business’s figures and risks?
- How strongly do the customers and know-how of a target business depend on the current owner?
- Is the seller willing to accompany a handover phase and defer part of the purchase price?
- How would a new business in the same region hold its own against existing providers?
- Which advice from the chamber, tax advisers and the bank will you use before you decide?
Buying and founding are not opposites but two routes to the same goal: a viable company of your own. The generational change in the Mittelstand makes buying a realistic option for many, one often given too little thought in planning. Anyone who examines both routes with the same questions, assesses their own resources honestly and seeks advice early makes a decision that still holds up years later.
Frequently asked questions
What is due diligence?
Due diligence is the careful examination of a company before it is bought. It focuses mainly on annual financial statements and projections, contracts, staff, taxes, legal risks and the condition of equipment. The aim is to assess opportunities and risks realistically, justify the purchase price and secure important points in the purchase agreement.
What is the difference between a share deal and an asset deal?
In a share deal, you buy shares in a company, which continues to exist with all its contracts, rights and obligations. In an asset deal, you buy individual assets such as machinery, stock and the customer base. Which form fits depends on the legal form, liability issues and tax consequences, which professional advice should clarify in each case.
Where can prospective buyers find companies looking for a successor?
The first points of contact are the succession advisory services of the chambers of industry and commerce and the chambers of crafts. Nationwide, the nexxt-change business exchange brings sellers and successors together, with listings handled by regional partners. Tax advisers, banks and industry associations can also help, as they often know of businesses looking for a successor.
How much equity do you need for a takeover?
There is no fixed ratio. Banks look above all at whether the business can cover interest and repayments from its earnings, and they usually expect a noticeable contribution of the buyer’s own. Promotional loans, guarantees and a vendor loan can narrow the gap. An early conversation with your bank and the chamber brings clarity.
Terms
- Due diligence
- A careful examination of a company before purchase, in particular of its figures, contracts, staff and risks.
- Share deal
- A business acquisition through the purchase of the company’s shares, with the company continuing to exist with all its rights and obligations.
- Asset deal
- A business acquisition through the purchase of individual assets such as machinery, stock, the customer base and rights.
Sources
- Nachfolge-Monitoring Mittelstand 2025, Fokus Volkswirtschaft Nr. 526 vom 9. Januar 2026 (in German)KfW Research
- ERP-Förderkredit Gründung und Nachfolge (077) (in German)KfW
- Über die Börse (in German)Unternehmensbörse nexxt-change
- Section 613a German Civil Code: Rights and duties in the case of transfer of businessBundesministerium der Justiz
- Section 15 Limited Liability Companies Act (GmbHG): Transfer of sharesBundesministerium der Justiz
Image: illustration, created with AI.
