Choosing the best way to start a business will make it easier for you to become a successful entrepreneur. Competing with established companies in your market is difficult unless your business operates at a high level. Challenges that you will face include technology, marketing, accounting, sales, and capital.
For example, business expenses such as insurance and utilities are unavoidable. Where will you get the capital to start paying for them while the business is young? How much equity will you give up in exchange for an investment to jump-start your company?
Successful entrepreneurs plan for these contingencies before they start a company. They also determine the best way to start a business. Studies have shown that three ways are possible. The three ways to start a business are as follows:
1. Starting a business alone
2. Buying an existing business
3. Investing in a franchise business
The following is a comparison of these three paths to business ownership.
3 Options on How to Start a Business
1. Starting a Business from Scratch
There are many benefits of starting a business alone. For example, you will keep all the earnings. You can make decisions quickly without a business partner or shareholder second-guessing your decisions. You can work at your own pace as well.
No one will shout at you and tell you that you should “do more than you are currently doing.” However, the downsides to starting a business from scratch are crippling. Did you know that you are personally liable for the debts of your company if you go it alone?
No one will share the blame with you or come to your defense. More importantly, you will be responsible for all functions of the company. That includes technical tasks such as locating a site or creating a marketing campaign. As you can see, going alone is a hard path for a budding entrepreneur.
It will consume your time, energy, and effort unnecessarily. In fact, starting a business from scratch is similar to reinventing the wheel. Avoid this mistake by using infrastructure and expertise that exists already.
2. Buying an Existing Business
Many people buy existing businesses for obvious reasons.
1. The previous owner did the groundwork for you.
2. They built the systems necessary for running the business.
3. The firm has a proven track record.
Consequently, your risk for failure is low because the company has consistent cash flow. Unfortunately, many people fail to realize that things change as soon as someone else takes over a business. One of the challenges is staff loyalty.
Remember, employees of the company built a reputation with its previous owner. Some of them did not quit because they felt attached to the owner. Some of them worked at a high level because they respected the owner.
These loyalties disappear as soon as someone else takes over the business. Suppliers, creditors, and clients reexamine their commitments as well. You cannot ask for your money back because of these challenges since contracts do not allow for you to receive a refund.
3. Franchising Is the Way to Go
A franchise refers to a business in which you operate under another party’s name. Franchisor is the name of the party that provides a license to budding entrepreneurs. It is worth noting that the franchisor gives you rights to their proprietary knowledge, production processes, and trademarks.
Franchising offers you critical elements that are present in the first two routes. For example, the business you start will be yours. It also means that you will take advantage of an existing framework that includes instant brand recognition.
Moreover, you will benefit from the systems the franchisor has already built. It includes an aggressive local and national marketing team. However, franchising offers you additional benefits as well.
These consist of receiving technical and financial support from the franchisor under strict terms and conditions. Also, franchisors advise you on the best business practices in your business including operational manuals. And help guide you on franchise processes and requirements.
All these paths lead you to business ownership. Starting from scratch or buying an existing business sound great at first. However, the disadvantages of doing so are numerous.
In contrast, franchising is the way to go. Contact me today, your franchise consultant. I will guide you on the investigative processes that come with investing in an existing franchise.