Buy, Build, Franchise, or Invest? Your Options for Building Wealth

There are several paths to take that next step, and each comes with its own advantages, risks, and tradeoffs. No single approach is right for everyone.

At the Lab, we believe buying an existing business is one of the strongest options. But a decision this important deserves an honest comparison. This guide looks at the main options, what each offers, and what you should understand before committing to one.

In this guide, you’ll learn:

Compared: ways to build wealth

The primary paths to ownership

When trying to build wealth, the table above highlights the biggest differences between these options — namely how much capital they require, how much control they offer, and the risks involved.

That said, these paths aren’t mutually exclusive. You can build wealth through a business, reinvest the proceeds elsewhere, and pursue multiple paths over time.

The right starting point depends on your resources and how involved you want to be.

Start a business

• Role: Founder & operator
• Starting point: Building from scratch
• Level of control: Full if bootstrapped; reduced with investors
• Primary risk: Business failure
• Asset liquidity: Low
• Best for: Entrepreneurs who want to build their own business

Starting a business means building everything yourself: the product, your customers, your team — all of it.

Done successfully, it gives you close to full ownership and the most creative control of any path here. Done unsuccessfully (a likely possibility, by the numbers) it can mean years of your work with little to show for it.

Not every founder takes the same route, and the route you choose matters. Bootstrapping and raising venture capital are different paths with different economics, different odds, and different definitions of success.

Bootstrapped & self-funded startups

Most new businesses are funded by their owners, not outside investors. If you go this route, that means slower growth in exchange for keeping full ownership and control from day one.

This route makes sense if you have an idea worth building, the skills to execute it, the capital to fund it, and a preference for keeping full control rather than answering to investors.

Potential advantages

• Full ownership from the start. No equity goes to outside investors, so all the upside belongs to you.
• Complete creative control. You don’t need anyone else’s approval for decisions about product, hiring, or direction.
• Lower baseline risk than raising capital. Growth is typically constrained by cash flow rather than investor expectations, which limits how fast you can overextend.

Potential drawbacks

• No existing infrastructure. You have to build every customer, process, and system from scratch.
• Uncertain survival odds. Roughly 66% of new U.S. businesses close within ten years, per Bureau of Labor Statistics data, and the risk doesn’t disappear once your business clears that mark.
• Slower path to meaningful revenue. Profitability climbs with time in business, but more than half of startup firms are still operating at a loss in their first two years, per the Federal Reserve’s Small Business Credit Survey.

Venture-backed startups

Raising outside capital can fund faster growth, but it also means answering to investors. Odds are stacked heavily against you if you take this route, which is far from the glamorized portrayal seen in most Silicon Valley startup narratives.

Venture capital fits you if your business needs substantial funding upfront to reach scale, such as with a technology company pursuing a large, fast-growing market. The formula is different from bootstrapping and is built around a small number of outsized wins rather than steady growth.

Potential advantages

• Access to capital you couldn’t raise alone. Some business models genuinely require this kind of funding to reach the scale that investors and markets reward.
• Outside expertise & networks. Investors often bring operating experience, hiring networks, and follow-on funding relationships.
• Higher ceiling on outcomes. The businesses that succeed at this scale can create outsized returns that a self-funded business generally cannot match.

Potential drawbacks

• High failure rates. Harvard Business School research found that 75% of venture-backed startups never returned investor capital, let alone provide a return to the founders.
• Equity dilution. Each funding round reduces the founder’s ownership stake, and investors may get paid first when the business sells.
• Pressure to grow quickly. Investor expectations can push founders toward aggressive expansion and additional fundraising instead of sustainable profitability.

Acquire an existing business

• Role: Owner-operator
• Starting point: Existing revenue, customers, and team
• Level of control: Full after acquisition
• Primary risk: Financing and inherited business issues
• Asset liquidity: Low
• Best for: Buyers seeking an established business with a proven track record

Acquiring an existing business means taking over a company with revenue, customers, and a team already in place. Rather than starting from scratch, you focus on finding the right opportunity, financing the purchase, and improving what already exists.

Acquisitions can be self-funded or backed by outside investors. One well-studied approach is the traditional search fund, where investors finance the search and eventual purchase. According to Stanford’s 2026 Search Fund Study, these funds have generated a 33.9% aggregate internal rate of return (IRR) and a 4.75x return on invested capital since 1984.

However, traditional search funds are concentrated among graduates of elite MBA programs, and their results aren’t representative of most buyers. Most acquisitions instead rely on SBA-backed financing, sometimes alongside outside investors. No comparable return study exists for those purchases.

For first-time owners, the appeal is straightforward: You can step into an established operation without having to build the business from scratch.

Potential advantages

• Existing cash flow and customers. Revenue, an established base of customers, and (often) a trained team come with the purchase, removing much of the uncertainty you’d face founding a business instead.
• Financing options unavailable to a startup. Lenders, including the SBA, will finance a purchase against an existing business’s cash flow in a way they generally will not for an unproven concept.
• A track record to evaluate. Historical financials give you real information to underwrite a purchase, rather than relying on projections and assumptions.

Potential drawbacks

• Purchase price & financing risk. You take on debt against the business’s future performance, and a downturn or mismanagement can strain your ability to service that debt. That debt will also typically come with a personal guarantee, putting your own assets on the line if the business can’t cover it.
• Inherited problems. You inherit whatever operational, cultural, or customer issues existed before the purchase, and some do not surface until after closing.
• Finding the right opportunity takes real time. Sourcing, diligence, and closing a deal is its own extended process, even before your operating work begins.

Buy a franchise

• Role: Franchise owner and operator
• Starting point: Established brand & systems; no customers or revenue
• Level of control: Limited by franchise agreements
• Primary risk: Startup failure
• Asset liquidity: Low, subject to franchisor restrictions
• Best for: Owners who want an established playbook

Buying a franchise means paying for an established brand, operating system, and training in exchange for opening a new location under that system.

It’s easy to mistake this for a shortcut to the built-in customer base and cash flow an acquisition provides. Opening a new franchise territory, however, means you’re building the customer base and hiring your team from zero. This is the same as starting a business, just with more existing infrastructure, an ongoing royalty fee, and a business model built around consistency across locations.

Franchising might suit you if you want to run a business but prefer a proven playbook to a blank page. It works especially well if you’re less comfortable building marketing, sales, and operations from scratch, since the franchisor provides a system for all three.

Potential advantages

• A proven operating system. Marketing, supply chains, and processes are already worked out, removing much of the guesswork you’d face starting a business from scratch.
• Brand recognition, for well-known systems. A widely recognized national brand may already have customers who trust the name before a location opens. A newer or smaller franchise system won’t carry that same advantage, and the customer-building work looks more like starting from scratch.
• Ongoing support. Franchisors typically provide training and operational guidance that you’d otherwise have to figure out alone.

Potential drawbacks

• It’s still a startup underneath the branding. A new territory has no existing customers or revenue. You have to build both.
• Less control. Franchise operating restrictions limit pricing, suppliers, branding, and other decisions that you’d otherwise make freely on your own.
• Ongoing fees regardless of performance. Royalties and marketing fees are typically owed whether or not your location is profitable yet.

Invest in real estate

• Role: Property owner & manager
• Starting point: Residential or commercial property
• Level of control: Moderate, subject to market conditions
• Primary risk: Market fluctuations and management costs
• Asset liquidity: Low
• Best for: Investors seeking long-term equity growth

Real estate investment is one of the more familiar paths to ownership, but the return profile looks different from what you’d see operating a business.

Direct ownership of investment property is less common than it might seem: 12.9% of families owned other residential property in 2022, with a median value of $225,000 among owners, and just 5.9% owned equity in nonresidential real estate, with a median value of $125,000.

Owning property versus owning a business comes down to how much day-to-day involvement you want. Real estate suits you if you want ownership and appreciation without running operations the way a business requires, and you’re comfortable with a longer timeline to build meaningful equity.

Potential advantages

• Rental income plus appreciation. Property can generate cash flow while also gaining value over time, a combination few other assets offer as directly.
• Leverage. Mortgage financing allows you to control an asset worth far more than its initial cash outlay.
• Tangible, familiar asset. You likely already understand property ownership through your own home, lowering the learning curve compared to other paths.

Potential drawbacks

• Slower equity buildup. Meaningful equity in real estate typically takes decades to build, a longer timeline than the other ownership paths here.
• Market cycles and competition. Returns have grown more competitive as more capital has moved into real estate, and cycles can turn unfavorable for extended periods.
• Ongoing management burden. Even without operating a business, real estate carries maintenance, tenants, and vacancy risk that will require your attention.

Invest passively

• Role: Passive investor
• Starting point: Investment capital only
• Level of control: None over investment decisions
• Primary risk: Market fluctuations & investment losses
• Asset liquidity: High in public markets; low in private investments
• Best for: Investors seeking returns without operating responsibilities

Passive investing means putting capital into stocks, index funds, or other businesses without taking on an operating role.

You likely already participate through a retirement account. As of 2022, 58% of U.S. families owned stock directly or indirectly, up from 53% in 2019 and 52% in 2016, making it the most common investment path on this list.

Other options include private funds, real estate syndications, and investments in someone else’s acquisition, though some require accredited investor status.

Passive investing is a good fit if you want to grow your wealth without operating a business or diversify the wealth you’ve already built through ownership.

Potential advantages

• No operating responsibility. Returns don’t depend on your day-to-day decisions or hours worked, so it can run alongside your current job or any other path on this list without competing for your time.
• Liquidity. Public market investments can typically be bought and sold far more easily than a business or property you own.
• Diversification. You can spread capital across many companies or assets rather than concentrated in one.

Potential drawbacks

• Lower ceiling on returns. Without an operator actively growing the underlying asset, your returns are generally closer to market averages.
• Limited control. You have no say in how the business or fund you’re invested in is run.
• Some vehicles require accredited investor status. Beyond public markets, many passive opportunities are restricted unless you meet specific income or net worth thresholds.

Up next

This piece covers the ownership and investment paths themselves.

➔ Is Buying a Business Right for You?, covers the personal factors, readiness, finances, risk tolerance, that determine whether acquisition specifically is the right fit for you.

➔ If you want a more personalized experience, join one of the Lab’s Roundtables and meet with other potential buyers and business owners in your area.

➔ What to Read and Listen to Next collects books, podcasts, and real acquisition stories to keep learning from.

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