Should I start a business from scratch, open a franchise, or buy an existing business?
One of the most frequent questions I hear is, “should I buy a franchise, start a business from scratch, or buy an existing business?”
Are you dreaming of owning your own business?
Is your dream to start a business? Is leaving your current job something you envision? Would you prefer to call the shots, make all decisions, and do things your own way? If so, owning your own business may be the solution. However, if you want to be successful, then you need to be committed to your dream.
Successful businesses are successful for many reasons.
There is a great deal of time and work involved owning and running a business. Everyone starting a business has visions of happiness, success, and money in the bank. However, there are reasons successful businesses are successful.
There are many options for owning your own business. You can start a business from scratch and go it alone; purchase a franchise and be in business for yourself, not by yourself; or purchase an existing business. There are advantages and disadvantages to each form of business ownership. It depends upon your situation, goals, interests, timing, and financial capabilities as to the ideal type of business. Following are factors to consider for each type of business.
Factors leading to success when you start a business include:
- A product or service that has enough potential customers to turn a profit in a reasonable period of time.
- Time to plan for all aspects of the business.
- A diligent, well-planned start-up phase.
- Skillful acquisition of new and lasting customers.
- Capital to invest in test marketing and advertising.
- Hiring efficient employees.
- Effective training programs for employees.
- Finding the right location – demographically and geographically.
- Professional advisors or mentors to call on for assistance if needed.
- Realizing that you are alone – all decisions will be up to you to make.
- Acceptance of the fact that mistakes can be time-consuming and costly.
Starting your own business is a dream for many people. If you are the independent type who is a self-starter, has a very good business plan, and is willing to take the risk to start from scratch, you may be very successful. However, if you want less risk, feel more comfortable with a proven business, and want the assistance of experienced professionals, then a franchise might be for you.
A franchised business eliminates obstacles when you start a business
Many obstacles to a start-up business can be eliminated through the purchase of a franchised business.
Advantages of a franchised business include:
- Proven product or service already in place.
- Faster start-up because of the systems in place and assistance you will receive.
- Business plan is much easier to prepare using a franchise.
- Marketing and advertising has been tested and proven.
- Using a branded company name makes customer acquisition easier and faster – promotes trust with customers.
- Funding is easier to obtain for a franchise than an independent start-up.
- Utilize franchisor knowledge to assist with hiring of employees and help you find the best applicants.
- Many franchisors assist with employee training, or provide you with materials to help you train the people you hire.
- Find the ideal location – franchisors have guidelines in place and often will assist in helping you find a great location.
- Call the franchisor for advice and assistance if you are not sure what to do about an issue. Other franchisees offer valuable advice.
- The franchisor provides a manual to follow the processes and systems. This manual will help eliminate the guesswork and chance for expensive mistakes.
- The franchisor has been through the process many times over and they provide ongoing support.
- Most franchises provide technology updates that an independent business often cannot afford.
There are thousands of franchises to choose from and they each have different processes and systems. Each franchise provides various benefits, training and support. Therefore, the potential franchise owner needs to conduct a thorough investigation of any franchise opportunity before purchasing. You can eliminate the guesswork and save yourself time and frustration by working with a franchise consultant such as Select Franchise Consulting.
For those who are risk adverse, need cash flow immediately, and have the capital, an existing business or resale franchise might be the answer.
When contemplating an existing business or resale franchise, consider these factors:
- Thoroughly check out the financials of the business before purchasing. Be sure to have a qualified accountant or work with a business broker to assist with this task.
- The investment in a resale business is much higher than for a startup. An existing business may cost 2-5 times the cost of starting from scratch.
- You will be in business right away when purchasing a resale business. There is no lag time between the preparation and start-up phase and time to cash flow.
- If there are problems with the business, you may not find out until after you purchase the business.
- The employees usually stay with the business. This can be an advantage, as they will already be trained.
- When the employees stay with the business – there can be a disadvantage as they will not be people you have chosen. There is a chance for personality conflicts.
- Check out the lease, as you may be tied to a lease for a long period of time.
- Be aware of any old or outdated processes, equipment, inventory, or technology that may need expensive updates or repairs.
- When buying what someone else has built, you do not have the opportunity to put your own personal stamp on the business.
- There is a chance of losing customers, as they may not like the change in ownership.
The answer to the question of, “should I buy an existing business, start-up my own business, or buy a franchise?” is – it depends. It depends on your goals, interests, financial situation, timing, skills, and many other factors. There are advantages and disadvantages to each option. Carefully consider the options, ask for professional advice and conduct a solid investigation before making your final decision to make your dream a reality.
For more information on choosing a business contact Select Franchise Consulting.
Read our blog – 30 days/30 franchises for information on 30 different business options.