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Buy or Start a Business

There may be many reasons for wanting  to establish your own franchise business. Investment opportunity, career move, planning for retirement, move, increased flexibility or lifestyle change (any or all of above), 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 potential business ownership has to offer. By working with one of our trained consultants who will guide you along the way, you will discover if business ownership is the correct next move for you.

 

How can I buy a business?

Investing in your own business may be one of the most critical and difficult decisions you will ever make. You don’t have to do it alone or feel pressured; our trained business consultants will guide you through the process, step by step until you are comfortable with your decision.

Sometimes individuals who are interested in starting a new business hesitate because they may not have the overall experience for what the business calls for: sales, marketing, human resources, customer service, quality assurance, daily operations, legal compliance, accounting, and other tasks that comes with business ownership. If you own a business all of those tasks and roles will have to be carried out on a daily basis. If you elect to join a franchise system you will reduce the need for knowing it all right away. The foundation, and one of the most compelling reasons for entering into the world of franchising, is the fact that the franchisor already has developed the knowledge and the systems proven to be successful and can be duplicated in your market and location.

 

What is a franchise?

A franchise is a right granted to an individual or group to market a company’s goods or services within a certain territory or location.

Franchising is a way of doing business that allows entrepreneurs to be in business for themselves, but not by themselves. When you elect to buy into a franchise system, you will in return obtain access to the business methods and support, such as the right to sell a proven and recognized product or service, to use the franchisor’s business practices, advertising aid and to receive initial training and ongoing support.

When you buy a franchise you are also typically buying an exclusive territory. Franchisors will only allow a certain amount of franchises to open within a geographical region.

In comparison to start your own business from scratch, buying a franchise eliminates some of the initial hard work; there is already a proven business practice in place, this will save you valuable time and costly “trial and errors” since the products, services, and business operations have already been established. Since there is an already established system in place, there is a higher likelihood of success. If you follow the system the franchisor has put in place, you should be on your way to running a very successful business in less amount of time than if you do it all on your own.

It is a common misconception that franchise systems only exist in the fast food industry. Franchising systems exist in more than 300 different industries with over 3,400 franchises. In the process ahead we will evaluate what type of industry is right for you.

 

Advantages with a franchise

There are a number of advantages with belonging to a franchise organization. You will get access and benefit from an already well developed business and marketing system that may include:

  • Corporate image and brand name. Brand names, trademarks, copyrights, trade secrets, and patents. The corporate image and brand awareness of the franchise is already established. Consumers are usually more comfortable turning to a familiar name or company they trust and are aware of.
  • Uniform logos, storefronts, and interiors.
  • Adhering to the franchisor’s guidelines about business practices and standards will enable you to always provide your customers with quality goods and services.
  • Training – The franchisor will provide extensive initial and ongoing training and support in all areas of business.
  • Capital investment that may be less than starting a similar business independently. By the time you come up with an idea, test it, develop operating-marketing-sales systems, hire people, find a location, and source equipment. You will have saved yourself a lot of time and trouble by investing in an already established franchise system.

 

How much does it cost?

The investment of a business varies greatly depending on the type of business, its tenure and what industry you elect. Some businesses require a storefront or a restaurant location, while others may be home based or mobile. Some are more labor intensive and yet others may be a one-man-show. The range of the investment will vary greatly most require an investment between $20,000 to $1,000,000. While some franchise systems call for investments in the million plus dollar range to qualify. We will help you narrow down what type of business is right for you and evaluate how much investment is required to launch your business.

 

How do I find the right business?

The best way to select the type of business that is the right fit for you 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 capability. 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 eventually want to achieve?

 

INTEREST

Be honest with yourself; what are you good at? Do you 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 create repeat business, just not as frequently.

 

MULTI UNIT OR SINGLE UNIT OPERATION

Another important factor to consider is if you want to own one location or multiple. Some industries are designed to benefit multi unit ownership by allowing the cost factor to decrease and the income potential to increase with the number of units you own.

 

How much money do you have to invest?

You might have an idea of what type of business you want to get into, but realistically being aware of 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 you/do you 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 for different types of ownership. Take the time to find out which what will work for you and your situation. You will be glad that you did.

 

Will I qualify?

A franchise company is under no obligation to award a franchise business to everybody who is willing to purchase their franchise.

Like any good business, a franchise company will want to populate their system with great people. Since franchising uilds it’s foundation on a strong, consistent brand, the franchisor will look for future franchisees who will fit within their system and will represent the brand well. 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 them. 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 good reasons to learn what works and 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
  • 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 looking for volume, hoping some of their 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 advise if you suspect that a franchise may fall into this category.

 

Can you get financing?

It’s typically easier to obtain financing if you buy a franchise, than if you start a business from scratch, as franchises can show established track records. There are several ways to secure funding to purchase a franchise such as; traditional bank loans, Small Business Administration (SBA)-backed loans, non-traditional loans, and franchisor financing programs. There are also companies that will roll your 401K, or other retirement plans into a business loan. Your business consultant can advise and direct you if you need financing.

 

Franchising is not for me – what are my options?

Buying a franchise works best for individuals who work well in a team environment, 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 is always the option of starting a business from scratch or buying an existing business.

 

Buying Existing Businesses or Start from Scratch?

For some entrepreneurs, buying an existing business represents less of a risk than starting a new business. 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 rely 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. There are some important 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 startup 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 higher than the cost of starting a new business as the initial business concept, customer base, brand and other fundamentals are already in place. Be aware of hidden problems associated with the business, like debt, or receivables that 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.
In addition to your business consultant you would definitely want to put together an “acquisition team” consisting of 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 due diligence is done, you will know 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. 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 the asking price. Whatever method you use to determine the fair market price of the business, your assessment of the business value should take into account such issues as the business 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.