To buy or to build?
The next thing to consider is how you will go about acquiring or creating your new business. Will you set up a local franchise of a larger, established brand? Will you purchase an existing business and take over where the previous owners left off? Or will you start completely from scratch and build a business that is uniquely yours?
All three options have their merits and their drawbacks. Take a look at the following descriptions and see which one resonates best with you and your list of niches, business models, and location preferences.
Open a franchise
It is common for entrepreneurs, both aspiring and experienced, to choose a business model based on what they feel will give them the highest potential for profit, by selling products or services that are in high demand. All too often, however, the process of putting the proper systems and procedures in place tends to be skipped, ignored, or lost during the mad rush to bring their product or service to market. This can happen despite all their best efforts to properly plan and organize their startup.
Most entrepreneurs are driven to start their own business by the promise of ultimate freedom and creativity it provides, unlike being employed or being a freelancer where you still take orders from someone else. Ultimate freedom and creativity may sound good, but it does demand determination and discipline to produce a viable startup and ensure the growth and longevity of the venture well into the future.
This yearning for freedom and creativity can cause significant problems for those entrepreneurs who have never owned a business before. Lack of experience has been pointed out as one of the main contributing factors to many a business’ ultimate demise.
What if you could “borrow” someone else’s experience? What if you could shortcut the planning process and ensure that the proper systems and procedures are implemented in the proper order by using an existing successful business as a platform to build upon, which you can grow and expand at your own pace according to a set of proven instructions?
This is exactly what you get when you buy a franchise. A franchise is basically a business in a box. All the research and planning has been done for you with regards to product selection, market research, competitive analysis, customer analysis, sourcing, logistics, distribution, etc. You just follow the step-by-step instructions and next thing you know, you’re in business. You do give up some degree of freedom and creativity in exchange, since most franchises operate under strict rules and regulations put in place to protect the reputation and consistency of the brand.
The company that created and/or owns the original business idea is referred to as the franchisor. A person who purchases the right to copy that original idea is referred to as a franchisee.
Obviously, some franchisors are superior to others with regard to the support they provide to their franchisees, as well as the quality of the information and materials provided. The cost of purchasing a franchise also varies widely, depending upon the reputation of the brand, as well as whether an initial purchase is required for specially licensed inventory, equipment, or supplies.
It is often easier to get financing for a franchise, as opposed to starting a completely new business, because the product and the business model are proven to yield a particular result when implemented properly. However, the ability of the franchisee to properly implement those plans is also taken into consideration.
For some entrepreneurs, purchasing a franchise seems like the magic bullet that’s guaranteed to hit the target and bring them all the success and profits they dream of. However, keep in mind that it is not only the business model but also the way the business is handled that dictates the results. Franchises can provide a short cut, but they’re not a guarantee.
Lastly, while purchasing a franchise may lessen the amount of work you need to put into your business planning, product selection, and marketing strategy, you still need to do your due diligence in order to ensure that the franchise you select is reputable, stable, and that other franchisees have been successful for the long-term – that it’s not just a fad or a flash in the pan.
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