There is a good chance you will face a career transition at some point in your life. There are many reasons for this. You may have lost your job, you may have reached a plateau in your current career path, you are bored with your current job, or you may want more personal and financial independence. In all of these cases business ownership can be the solution. However, there are different types of business ownership which can be considered.
First of all, you can start a new business from the ground up. Here, you have the vision for a product or service that can be offered in the market successfully. You will be responsible for all aspects of the business including developing the back-office procedures and processes, developing the sales and marketing collateral, developing sales and marketing strategies and campaigns, having responsibility for staffing and responsibility for the general management of the company. Most importantly, you will need to get funding for the new company. This will involve putting together a business plan that will convince banks or other funders to fund the company. About 50% of small businesses are still in business after 5 years.
Another alternative is to buy an existing business. When you buy an existing business, you have a performance history and track record to base your decision. The corporate structure and many of the sales, marketing, and general policies and procedure are already in place. However, you will need to evaluate the business. This will involve understanding the health of the business through a complete review of the books, determining if there are any legal issues confronting the company, and completely understanding why the business is being sold. Understandably, a complete due diligence will require the professional services of business acquisition accountants and attorneys. Also, as above, funding will be necessary.
A final option is to invest in a franchise. Franchises are businesses where the franchisor has successfully developed a business and is expanding by licensing the company’s proprietary business knowledge, processes, and trademarks to franchisees in other markets or geographical areas. The advantage of buying a franchise is the opportunity to buy a business with a proven business model and a track record in other markets. Normally, the franchisee pays the franchisor a fee to acquire the franchise licensee and an ongoing royalty to operate the business. The franchisee owns and operates the franchise independently under the franchise agreement.
There are federal and state laws protecting consumers when buying a franchise. When you are looking to buy a franchise, the due diligence should include a thorough review of the Franchise Disclosure Document and the Franchise Agreement, interviews with other franchisees, and checking state and local rating agencies such as the Better Business Bureau. It is strongly recommended that a franchise attorney review the Franchise Disclosure Document and the Franchise Agreement. Approximately 85% of franchises remain in business after 5 years.
There are approximately 4,000 different franchises in the United States. As you can imagine, it is a daunting task to find a particular franchise that meets your goals and lifestyle. Franchise consultants can help greatly in this process. A franchise consultant will work with you to understand your goals and needs and find franchises that match those requirements. Most franchise consultants have partnerships with the auxiliary services such as funders and attorneys, and they will coach you through the entire acquisition process including finding, funding, and opening a franchise, thus making it much easier for you. Furthermore, this is done at no cost to you as franchise consultants are paid by the franchisors.
In summary, business ownership can take many shapes. Some types of business ownership are riskier than others. Some offer more independence than others, while some offer a proven successful business model that must be followed. In the end, it is up to you to understand what is right for you. Please feel free to contact me with any questions. We are here to help.