06/ 14/ 2004
by Vicki Gerson
If you have decided to become your own boss, there are several things to consider. But let’s start with the basics – what kind of business do you want? Whether you start a business from scratch, purchase an existing business or buy a franchise, each of these options has its pros and cons. Here are some factors to consider.
Start your own business:
Pros:
- You are your own boss.
- You can use your ideas and creative input.
- You can start small or large depending on available finances.
- You can set the time when it’s right to open.
- You can select personnel to complement your own experience.
Cons:
- Mistakes from inexperience are bound to happen and may prove costly.
- Borrowing money may be quite difficult.
- You have no track record.
- You must write a complete business plan, which takes time and effort.
- A good deal of time is required to build customers, establish a reputation and become profitable.
Purchase an existing business:
Pros:
- You already have a viable location.
- Inventory and supplies are there.
- Suppliers are already established.
- Experienced employees are available.
- Customers are established.
- A profit picture should exist.
- You can call on the previous owner’s experience as part of the transition period.
Cons:
- The lease could be expiring and you have to negotiate with the landlord.
- The premises may have to be modernized.
- The equipment may be old or in need of repair.
- The existing location may no longer be in your target market area.
- Present or incoming competition may be too strong to allow you to make a profit.
- The overall purchase price is higher than the initial cost of a start-up.
- The financial records may not paint an accurate picture.
Purchase a franchise:
Pros:
- Franchises are popular and have name recognition.
- Their success rate is higher than starting a business on your own.
- Usually, there is immediate income.
- You may be offered exclusive territory.
- You can purchase a franchise that has a product or service in a growth market.
Cons:
- There are long hours and hard work involved as an owner-manager.
- Beware of franchisers who want a signed contract quickly.
- Be wary of any franchiser who discourages the use of your own attorney or accountant to review the contract.
- Confirm the product or service is of high quality.
- Some franchises may have over-saturated the marketplace.
When you are considering purchasing a franchise, ask about franchise fees, royalties, purchasing restrictions, buy-back terms, site selection and a description of the training program. Purchasing the right franchise takes a lot of homework on your part.
Of course, these are only partial lists when it comes to the possibilities of becoming a small-business owner. Do your research, take your time and make the decision that's best for you.
