You’ve made the decision. Perhaps you’re an aspiring entrepreneur who’s dreamt of leaving your role of being someone else’s employee and finally becoming your own boss. Or, you’re a seasoned entrepreneur ready to diversify your income with an additional business venture.
Either way, you’ve noticed the signs of a quickened recovery. Small business, always the fulcrum of the resilient U.S. economy, is making a comeback. You’re ready to play your part.
THREE WAYS TO START A BUSINESS
So, what do you? If you’re a member of the J. Paul Getty or Hilton families, you do nothing at all, except live on your inheritance. If you’re anyone else, however, you’re going to start your own business in one of three ways.
Perhaps you’ll design your own business from scratch. Or, you could buy an independent business through a business broker. Or, finally, you could bring yourself into entrepreneurship under the tutelage of an established franchise.
What’s best for you? There are pros and cons to all three approaches. Much will depend on your personality, business experience, motivation and assessment of risk.
OPTION 1: START A BUSINESS FROM SCRATCH
Let’s say you grew up in a family of entrepreneurs, always had a fascination with business, and earned an undergraduate or master’s degree in business in pursuit of that interest. For you, starting a business from scratch might be the ticket, because you’ll probably put a lot of effort into the early planning and preparation phases, a crucial stage in business formation which most people neglect. As someone who lives and breathes business, moreover, you’ll be much more acquainted with the possibility of failure, and better equipped to handle the situation if it happens.
On the other hand, even the most experienced operator will make mistakes when starting a new venture. And while mistakes present a learning opportunity and path to greater efficiency, the time involved in acquiring those lessons can cost valuable time and resources.
Additionally, someone who creates and runs a business is usually, by definition, involved in all aspects of the enterprise, day and night. That type of intense involvement can be exhilarating in the short-term. Over the long haul, however, it can be awfully debilitating.
OPTION 2: BUY AN EXISTING INDEPENDENT BUSINESS
What about buying an existing business? There could be a lot of advantages if it’s a solid business, because you would be paying for an entity that’s already running, has a set of standard practices, and in many cases also offers the benefit of goodwill and an existing customer base. And if you haven’t yet worked in the industry of the business you’re acquiring, you can negotiate a period of training and apprenticeship for yourself.
But buying an independent business also has its risks. There is no business police agency in the United States that can help you distinguish a good business from a poorly-run one (absent those that have been convicted of crimes). The overriding principle at play, under those circumstances, is caveat emptor: let the buyer beware.
You can certainly minimize risks by hiring a good attorney and accountant to go over the seller’s books and records before you buy. Even the best precautions, however, may not shield you from incomplete or misleading records, and even the most experienced professionals can miss the fuse to a bomb that will later blow up.
OPTION 3: BUY A FRANCHISE
The third option, then, is buying a franchise. If you choose to go with an established franchise with a record of success, you’ve minimized your risk. After all, you’re adopting a business system that has been refined by mistakes and market challenges over the years on its way to developing a reliable and proven operational model.
Franchises are also a great option for those individuals who have less personal experience in business. A good franchise will provide you a turn-key business solution – basically a business in a box – complete with operational software, business systems and procedures, marketing plans, and ongoing training and support for as long as you own the franchise. And unlike the Wild West world involved in buying an independent business on the open market, franchises are strictly regulated by federal and state governments to protect consumers from unethical practices and overbearing sales techniques.
The most obvious downside of a franchise is the requirement to make royalty payments – usually a set percentage of gross revenues that are received by your franchise business on a weekly or monthly basis. The question an informed buyer of a franchise needs to figure out is whether the trademark rights, business systems, training and support you receive as part of the franchise package make the royalty worthwhile. An experienced franchise consultant, attorney or accountant can help you make that assessment.
As a franchise consultant, I have to admit some bias toward the franchise model. That’s because there are so many safeguards built in. Strict government regulations ensure full disclosure and an even playing field for all buyers. And even the largest and most powerful franchise companies forced to work in this ecosystem understand the massive damage to their profits and reputation that would ensue if they were to break the rules or treat their franchisees unfairly.
One has to admit that starting a brand new enterprise is a scary thing, even for an experienced entrepreneur. Joining a top franchise will greatly lessen that apprehension.
You’re not having to reinvent the wheel with every new strategy or initiative, as you would with a business you’ve started from scratch. To the contrary, you’ve been given the privilege of using a business system that has proven itself, year after year, for a wide variety of franchise owners.
What’s even more fundamental to the superiority of the franchise model for most people, in my view, is that you’re buying a team of operational, human resource and marketing experts who will be with you for the entire time you own your franchise. As those of us in the franchise industry like to say, you’re in business for yourself, but not by yourself.
It may be true that all of us come into the world alone and exit alone. In between, however — and especially when it comes to running my own business — I’d prefer to be collaborating with friends, colleagues and supporters. That’s what you get with a franchise.