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By Richard Parker, President of The
Business For Sale Buyer Resource Center™ and author
of the most widely used reference resource and strategy
guide for buying a business for sale - How To Buy A Good Business At A Great
Price©
An Overview of Today's Business Opportunity
Market
All indicators point to continued growth within the
"business opportunity" segment. There are
usually three independent factors that contribute to an
increase in people looking to get into their own
businesses. Lower interest rates play a significant role
by allowing individuals to finance their business at
attractive rates. Next, the job market: when jobs are
plentiful, people first think about switching companies
rather than considering self-employment. When jobs are
scarce, owning a business becomes a viable option. The
final factor is the financial market. When the stock
market is stable or increasing, and CD rates reasonably
attractive, most Americans are comfortable in allowing
their money to grow from these investments. However,
recent years have shown that the market is not for
amateurs and so average people look to other vehicles to
build their wealth, hence, self-employment.
Whenever one of these three areas is in disarray, the
business opportunity market enjoys a growth spurt. Right
now, all three are in flux, so the numbers of people
looking to take control of their own destiny is
booming.
However, the category we've come to know as
Business Opportunities is somewhat misleading. When I
hear this terminology, I can't help but think of
"get rich quick" schemes and unrealistic
infomercials promising riches beyond belief.
A recent poll indicated that 50% of all Americans
dream of owning a business. For most, there are three
possible options that make sense: starting a business,
buying a franchise, or buying an existing business. All
have their pros and cons, and the choice depends upon the
specific needs, goals and expectations of each
individual.
Start-Ups
I've always believed that everyone should start at
least one business from scratch in his or her lifetime.
It can be one of the most exhilarating and educational
undertakings you will experience. Unfortunately, the
chances for success are not very good. In fact, over 80%
of all start-ups fail in the first three years and 80% of
those that make it, fail in the next two years. That
means that 96% fail overall; quite an expensive
education, isn't it?
The biggest culprit contributing to failure is a lack
of capital. I have started several businesses and
I've now come to expect the following:
- Revenue comes in about half as quickly as
originally expected.
- Expenses are usually much higher than
anticipated
- The world is never as excited to buy my
products/services as I thought they would.
Of course, many start-ups survive, and thrive, way
beyond expectations. Certainly, I've had some
blockbuster experiences, but several dismal failures. If
you're going to start a business, it is critical that
you not only plan properly, but you are certain that you
have the financial resources to endure a
slower-than-expected period to profitability.
Franchises
Running a franchise can be a wonderful starting point
for those making the leap from the corporate world to
self-employment. The beauty of franchises, in theory, is
they provide you with a recipe to operate your business,
covering all of the daily activities that you can expect
to encounter. While it does sound attractive, one must
also realize that the potential upside is generally
limited.
Gone are the days of obtaining master franchise rights
for an expansive territory, unless you buy into an
unproven franchise. Typically, as soon as your franchise
location begins to achieve some success, the master
franchiser will open additional locations nearby. In
effect, your "partner" becomes your
competitor.
While franchises can be a wise choice for some,
experience has shown that buying an existing franchise
location can be a more prudent decision. A new location
is much like a start-up, except that you'll have a
game plan and supporting materials. When considering a
franchise, it is wise to investigate the business on your
own and the best way to do that is to speak with existing
operators of the franchise you are considering.
Keep in mind that the franchiser's agenda is to
sell you a franchise. Surely, they want you to succeed,
but opening new locations is their corporate objective.
So while they may provide you with additional support, it
is important for you to do your own research to be sure
that you are capable of running the business and that the
market and location are right. Your relationship with the
franchiser is crucial. If you do not feel confident and
trusting of them, then you must carefully consider
whether or not you want them as your partner in this
venture.
Personally, I believe that if you're going to buy
a franchise, then buy a resale. This way, you get the
best of franchising and all of the pluses that an
existing business has to offer.
Existing Businesses
Buying an ongoing enterprise will provide you with
benefits that are not available in either a start up or
franchise (except for a resale). With an existing
business, you'll have:
- Historical financial information
- A built-in infrastructure (employees, customers,
suppliers)
- Immediate cash flow
While this sounds wonderful, there may very well be a
premium for these added benefits. However, when it comes
to investing your money, the objective is to make a
prudent long-term decision and an existing business
offers you the largest potential upside. Plus, you'll
generally negotiate directly with the seller and so you
can construct a creative deal that will allow you to
acquire the business for less than you would expect.
Regardless of what road you choose to pursue, the most
important thing is that you do something! Everyone knows
that unless you have a senior position within a company,
you simply cannot get rich working for someone else. Even
if you're an executive with an attractive
compensation package, you're one bad quarter away
from unemployment.
For many, owning a business is a dream. For some, it
will become reality. Your fate is in your hands. Whether
you choose a start-up, franchise, or existing business,
it can be done. It's up to you. Currently, the market
is in your favor and the time is right, for you to
finally put yourself in a position to be your own
boss.
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About the Author
Richard Parker is President of Diomo
Corporation - The Business Buyer Resource Center ™
(www.diomo.com ) and Diomo Solutions,
LLC (www.diomosolutions.com) He is the
author of How To Buy A Good Business At A Great
Price© a 600 plus page how to strategy guide
geared for anyone thinking about buying a business. His
materials are used by prospective business buyers in over
50 countries. Mr. Parker's articles, syndicated
columns and other "how to" guides have been
published extensively online and in various print media
He is also one of the most successful business brokers in
The United States, assisting both buyers and sellers. Mr.
Parker has personally purchased ten small businesses
since 1990. Email
your comments to Richard or visit his
website
This article is © Copyright 2005-2006 by Richard
Parker and may not be reproduced in any format whatsoever
without prior written consent of the author.
The recommendations of reading, reference materials or
links mentioned, are for general informational purposes
only. The materials are intended as a public service and
are not a substitute for obtaining professional advice
from a qualified firm, person or corporation. Consult the
appropriate professional advisor for complete and
up-to-the-minute information. These materials do not
constitute the rendering of any legal or professional
services.
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