So you want to go into business and are ready to be the CEO of your life. Do you start a business based on a great idea you have? Do you buy an existing business or maybe you look at a franchise opportunity? What do you do? I recently talked to Ted Fireman, President of FranNet Louisiana and he provided me with good insight.
Most of us want more control of our financial security, our daily schedule, and our future. If you are considering “being your own boss” careful due diligence is a must when choosing a business. Your tolerance to risk (including financial), effects on your family and other considerations all go into evaluating whether or not you want to start a business, buy an existing business or look at investing in a franchise. Managing risk and finding the best match that will meet your goals and objectives are vital. If you just plunge, you will lose. Here are a just a few considerations (some advantages and disadvantages) of the three business types to consider.
Starting your Own Business – The big advantage is that you are in total control. You make the ultimate final decision in everything and keep all the profits (and losses). There is greater risk so the upside potential is greater as well, but people who start their own business from the ground up also have the highest failure rate. In what I refer to as the “true entrepreneur, “you are it (CEO, Office Manager, Operations manager and more). You bootstrap, raise funds (generally less than what is needed in buying a business) from friends and family to get you to the next level. One thing is for sure, you love risk and your passion will help you succeed.
Buy an Existing Business – When you buy an existing business you already have customers, cash flow and goodwill. Through proper due diligence, you can evaluate a company to see if the value is good, determine if it interests you and can make a go of it. Because there is history, you generally have increased options for raising money (if needed) because financing options are better than in a startup. Plus, there are already systems in place that can be beneficial. The big issue is, do you have enough money to buy it? Doing your due diligence when buying a company is SO IMPORTANT, so make sure that you or a professional firm helps you. You want to validate everything so there are no surprises such as lawsuits, employee dissatisfaction, debt levels and more.
Buy a Franchise – Purchasing a franchise is actually gaining in favor and there are a lot of good reasons to look at a franchise. First of all, a company creates franchises because they have a product or service that has been successful and they wish to model that in other areas. Therefore you have a proven business system in place with training and support from an organization who wants you to succeed. You can also get feedback and support from other franchise owners and there are a wide range of businesses to choose from. The one drawback is that you really have to follow the franchise system, so to succeed you should be prepared to follow the system. Some franchises are flexible which allows for creativity. There is a one-time franchise fee and depending on the franchise, it can be expensive (financing a franchise is not too difficult for the most part though). You also have to pay royalty fees and choosing the right franchise for you can be a bit overwhelming but the overall success rate for franchises is the highest among other business models.
Starting a business is relatively easy; succeeding in business is the real challenge. Knowing what you want when it comes to risk and your ultimate interest (you better have passion) and fulfilling your goals is an even greater challenge when going into business for yourself. But IT CAN BE DONE. I have really only scratched the surface in determining what business is best for you but if you want to know more, you can contact me (mlewis@simmonswhite.com) or Ted Fireman (tfireman@gmail.com) who is your expert on franchises. Here is to your success……