Both can be very challenging.
1. Know what you aim to achieve in the business (are you trying to change the world, are you out for lifestyle or determined to build a fast growth business, do you need total control or would you be interested in an MBO where you and a few other managers own a smaller but potentially very valuable stake, do you want to own it for life or exit in 5 years, etc.)
2. Know your personal objectives and make sure they fit with your business objectives (for example, its hard to run for council or other political office if you want to buy or build a fast growth business)
This is not exhaustive but they are extremely important in forming your decision.
Buying is probably going to cost you more upfront and there are risks such as losing key customers as pointed out by Scott. Another key risk is the potential loss of key staff. Is your style going to be the same as the prior owner? If not, customers and staff may walk.
If you buy another company, you need to be careful to get appropriate representations and warranties about the business (and that they vendor can actually pay the damages if you sue for them – if they can’t, reps and warranties insurance is possible.
You will want to buy the business and its assets so you don’t get stuck with any legacy liabilities of the company (tax issues, legal, PI claims, etc.)
In summary, buying a business means careful due diligence upfront and careful planning to retain clients and staff and so forth after the acquisition.
Today, with private equity, its possible to buy very large businesses with the support of private equity sponsors. If you are doing it alone on a smaller scale, make sure you don’t over pay, try to pay in instalments with some based on subsequent post-acquisition performance of the biz.
Building has its own set of difficulties. You are starting from scratch. No customers, no products/services. It also takes funding but that is somewhat spreadout over time. Of course it can be awhile until the first signs of revenue. Cash flow forecasting will be key, as well a careful analysis of the customers and markets. Get into their world. Read what they read, do what they do, network where they network.
My number one tip for starting from scratch is “customer first, then product/service” – find the pain/need, then solve/fill it, fast!
Cheers
Tom