Most of us, sometime in our lives have dreamed of owning our own business.
 
Being the boss! Giving up the security of a regular paycheck for
the excitement of Entrepreneurship. For the purpose of this discussion,
an entrepreneur is defined as a person who organizes, manages and
assumes responsibility for a business

There is, in fact, in America today, a trend for more, and more people in all
walks of life and from all age groups to own and operate their own business.

Annually, according to Forbes, three and one-half million businesses change
hands. This figure breaks down to approximately 13,500 businesses changing
hands every working day.  

The reasons for this career change from employee to employer are varied
as the numbers who make the switch. For some It is disillusionment with
corporate life. For others it is the built-in tax advantages. For some it
is the discovery that working for others does not offer the security and
opportunity for personal growth they once hoped for.

However, before you join the millions who have embarked on this quest of
owning a business, there are many questions you must ask yourself. Here are just a few:

In this article I will discuss the pros and cons of three approaches to owning
your own business: the start up, the franchise, and the existing business.

Let's first look at the odds for success in these three separate categories. The U.S. Department of Commerce notes that statistically the entrepreneur, who starts a business from scratch, has a 91 percent chance of failure within the first two years. A full 65 percent will be out of business within five years.

The person purchasing a solid, well conceived franchise has a better than 90 percent chance of success, and the purchaser of a successful, existing business is given an 80 percent chance of continued success.

From these statistics it would seem a prudent person would be wise to purchase a franchise or an existing business rather than start-a business from scratch.

Yet many will travel uncharted waters because they do not wish to purchase "Blue Sky" or "Good Will", which is almost always a part of the purchase price of a solid franchise or a successful, existing business. Others may start up a business because their idea is unique and nothing like it exists in their particular area.

Before we examine the franchise and existing business opportunities, let's look briefly at a few of the challenges facing the entrepreneur who starts from scratch.

High on his/her list of priorities should be location, advertising and marketing and financing. These three areas require time, money and expert planning. Most entrepreneurs starting a business have little expertise in these three areas.

They choose the wrong location, spend, too little or too much on the wrong kind of advertising, and have insufficient capital to carry their business through   the critical start-up period. This is why many of that 91 percent of start-ups fail within the first two years of business.

The solid, well conceived franchise opportunity supports the franchisee in at least two of the above mentioned areas. Most have a regional operations manager who assists with site selection, using market studies on traffic counts, and patterns, zoning and demographics to find the optimum location. The franchisor will employ a professional advertising and marketing staff to provide proven promotional materials, sales and marketing techniques.

In the area of financing, the franchisor may even offer help to the prospective franchisee. Many will go out of their way to assist you in getting the financing you need.  Some may lend you the entire amount, with payments coming out of the income from the franchise operation. Others will carry part of the financing and find you a lender to finance the balance.

Although franchising has enjoyed exceptional growth, and the failure rate is less than 10 percent, many who dream of owning their own business reject the restrictions and limitations often imposed on them by (be franchisor.

This brings us to the third category: the successful existing business.  The three problems we have been discussing — location, advertising and marketing and financing — have been addressed and solved by the present owner. The purchaser of a business in this category knows beforehand that the product or service has been proven in the present location.

He knows, also that the advertising and marketing strategy has proven successful. Finally, because majority of the existing businesses sold are seller financed, and because they have a positive cash flow, the buyer will need little more than a down payment.

In conclusion, remember there are risks in any business venture. The bankruptcycourts are full of those who tried and failed.

Owning and operating your own business takes many hours of hard work. There is little time for family, friend and vacations.

There is little security and no guarantee of success. However, for many there is no other way. Owning your own business is still the American Dream!

About the Author:
Bob Macek is a business consultant specializing in small mid-size businesses. He has been a Professional Business Broker since 1982.
If you have questions regarding the purchase or sale of small, mid-size companies contact Bob at: bob@probizusa.com