Should I buy I franchise, an existing business or start my own?
There may be a variety of reasons you are thinking of owning your own business. Whether you are looking for an investment opportunity, career move, planning for retirement, location move, increased flexibility, business ownership, or lifestyle change, you are about to embark on an exciting road joining thousands of people who have already traveled down this path to discover more about the opportunities and benefits business ownership offers. By working with one of our experienced Lookout Services consultants, who will guide you all along the way, you will discover if business ownership is right for you.
How can I buy a business?
How much does it cost?
How do I find the right business?
The best way to select the type of business is by going through our step-by-step evaluation process. The process will take all the important factors into consideration: We will address your interests, strengths experiences, abilities, skill sets and financial resources. Many new prospective business owners select an industry based on their personal experience and existing knowledge; however, there are some other important aspects to take into consideration when you plan your future as a business owner:
What do you want out of your business? Only you know why you are thinking about starting a business. Do you want more flexibility? Do you want a side business/hobby that you can build up while you stay in a current position? Is it time for a lifestyle change? Will the new business be your primary and only source of income? There are many factors to consider but they all stem from the question – What do you want to achieve?
INTEREST – Be honest with yourself; what are you good at? Do you not get along with computers? Do you like dealing with the public? Are you good at managing people? Your skill sets will guide you towards (and away!) from certain types of industries. You don’t have to be an expert, but it helps if you chose something that you will enjoy doing. If you like working with children, animals, craft or sports, then target a business or a franchise that matches your interests.
REPEAT BUSINESS – Different industries are also more or less suitable depending on repeat business. A coffee shop for example will most likely create a steady stream of repeat customers on a daily basis, as opposed to a home-improvement business that may very well create repeat business, just not as frequently.
MULT-I UNIT OR SINGLE-UNIT OPERATION – Another important factor to consider is if you want to own one location or many. Some industries are designed to benefit multi-unit ownership by allowing the cost factor to decrease and the income potential to increase with the units you own.
How much money do I have to invest?
So you might have an idea of what type of business you want to get into, but realistically knowing your financial situation will also play a part in your decision process. Almost no new businesses, franchises or not, will be profitable from the get go; so in addition to purchasing the business you must also consider covering your day-to-day living expenses until the business gets off the ground.
How involved can I/do I want be?
Are you looking for a full time, part time, or do you prefer absentee ownership? This decision will have a great impact on what type of business you should chose. Some business systems are designed to be more beneficial than others for different types of ownership. Lookout Services will help you find out what will work for you and your situation. You will be glad you chose to work with us.
Will I qualify?
If you elect to go into franchising it may not be immediately evident, but a franchise company is under no obligation to award a franchise business to everybody who is willing to purchase the franchise fee. Like any good business, a franchise company will want to populate their system with great people. Since franchising has as at its foundation a strong, consistent brand, the franchisor will look for future franchisees who will fit within their system and who will represent the brand in a positive light. In the same manner, they are looking for people who are able and willing to learn the system and who will work within the specific parameters of their established franchise system. When researching a franchise company, you will find that the franchisor may have as many questions about you as you do about their company. A franchisor is putting their time, money and reputation on the line, so most have developed a “profile” of a successful franchisee which they use to determine if you are “right” for their business. While this may sound exclusionary, franchisors have a very good reason to learn what works and then to stick with it. Successful franchise companies want their franchisees to excel. They have refined their systems around a set of standards pertaining to: capital, personality, skills and experience. The goal for every franchisor is successful franchisees. As much as you may want to qualify for a franchise system that interests you, remember that the franchisor has the background and experience to know what type of person makes a good franchisee in their system. If you encounter a franchise that is not selective when choosing franchisees – look out. If they are not doing their due diligence they are just going for volume hoping some of the businesses will succeed. Stay clear of these companies as they will not be vested in helping you achieve your long term goals. We can help you with advice if you suspect that a franchise may qualify to this category.
Can I get financing?
If franchising is not for me, what are my options?
The buying of a franchise option works best for individuals who work well in a team environment and have limited business and industry background. For others, the road to “true” entrepreneurship represents the ideal path to business ownership. Take the time to consider your options. Buying a franchise may or may not be right for you. If you have come to the conclusion that franchising is not your cup of tea, there are always the options of starting a business from scratch or buying an existing business.
Should I buy an existing business or start one from scratch?
For some entrepreneurs, buying an existing business represents less of a risk than starting a new business from the beginning. While the opportunity may be less risky in some aspects, you must perform thorough due diligence to ensure that you are fully aware of the terms of the purchase.
Starting from scratch will many times present some distinct start-up challenges, such as building a customer base, marketing the new business, hiring employees and establishing cash flow…all without a track record or reputation to go on. If you have decided to buy an existing business, you will want to be sure you are making the right choice in your new venture. Your business consultant will guide you through the step-by-step process to identify what business opportunities will be right for you in your situation. However, if you elect not to go the franchising route there are some important additional considerations:
The Size of Your Investment – Finding profitable businesses for sale at reasonable prices can be difficult. Ask yourself why this business is for sale in the first place. Buying an existing business may drastically reduce your start-up costs. You may be able to jump start your cash flow immediately because of existing inventory and receivables. On the other hand, this usually means that the price of the business may be much higher than the cost of starting a new business because of the initial business concept, customer base, brand and other fundamental work that has already been done. Also, be aware of hidden problems associated with the business like debts the business is owed that you may not be able to collect. If you’re not careful, you could get stuck with obsolete inventory, uncooperative employees or outdated distribution methods. To make sure you get the best deal when buying an existing business, be sure to investigate the opportunity closely. Lookout Services helps you do just that. In addition to your business consultant you would definitely want to put together an “acquisition team”–your banker, accountant and attorney–to help you. These advisors are essential to reviewing and verifying all the relevant information about the business you are considering. When your due diligence is done, you will know just what you are buying and from whom. The preliminary analysis starts with some basic questions. Why is this business for sale? What is the general perception of the industry and the particular business, and what is the outlook for the future? Does–or can–the business control enough market share to stay profitable? Are raw materials needed in abundant supply? How have the company’s product or service lines changed over time? You also need to assess the company’s reputation and the strength of its business relationships. Talk to existing customers, suppliers and vendors about their relationships with the business. Contact the licensing and credit-reporting agencies to make sure there are no complaints against the business. If the business still looks promising after your preliminary analysis, your acquisition team should start examining the business’s potential returns and its asking price. Whatever method you use to determine the fair-market price of the business, your assessment of the business’s value should take into account such issues as the business’s financial health, its earnings history and its growth potential, as well as its intangible assets, for example, brand name and market position. To get an idea of the company’s anticipated returns and future financial needs, ask the business owner and/or accountants to show you projected financial statements. Balance sheets, income statements, cash flow statements, footnotes and tax returns for the past three years are all key indicators of a business’s health. These documents will help you conduct a financial analysis that will spotlight any underlying problems and also provide a closer look at a wide range of less tangible information.