The first step in choosing a suitable business for purchase is to decide between buying an existing business or franchise or starting a business from scratch. Each of the three options comes with a list of advantages as well as disadvantages. The next biggest decision is what type of business suits your lifestyle and background experience, taking into account such factors as income need and desire, owner involvement level and desired amount of free time, location, and size and many other personal factors.
Purchasing an Existing Business. Many buyers find great comfort in buying an existing business that has a long term history, a track record of success and a name in the community. The advantages are an existing customer base, established revenue streams, pre-existing employees, and an established location. Often an established business is viewed as a well-oiled machine that the new owner can easily step into and continue with business as usual. The previous owner will provide transition support and training to help the new owner.
There are, however, a few disadvantages to buying an existing business. The existing customer base will have preconceived standards and expectations for the business for which the new owner may have different ideas for or difficulty meeting. These standards and expectations can touch on anything from pricing, customer service or even hours of operation. Another concern is the implementation of change in the business, that may not be embraced by employees. Disgruntled employees may leave and then you will be left to conduct additional hiring. There can even be negative perceptions leftover from the previous owner that will need to be overcome.
Purchasing a Franchise. The ideal buyer for a franchise can be someone with little to no experience in business or the industry of purchase. The biggest advantage for a buyer in considering the purchase of a franchise is the model of support via the franchisor. Buying into a franchise is essentially buying a startup business, that already has a business plan, branding, marketing strategies and a whole host of other plans already established. The franchisor also helps with training, location search and lease support, design build-out, and set up for opening day.
The disadvantages of buying into a franchise are often the franchise fees and royalties required by the franchisor. Many new business owners, franchise or not, have minimal cash flow in the beginning of their ownership and paying a franchisor can be difficult. Another difficulty, for some buyers, is the requirement to follow the rules and regulations set and provided by the franchisor. Many entrepreneurs find difficulty in being told how to run their business on every level.
Starting a Business From Scratch. Starting your own business can feel powerful like you're living the American dream. Going into business for yourself allows you to make your own decisions from the very start of the business. You choose your business model, location, and the structure of your business. You get to hire all of the employees yourself. However, the clearest disadvantage is financing the business. It can be difficult to procure financing from a bank to fund a startup. Startups can also become very costly when you look at costs such as location build-out, equipment purchase, product development, and hiring.
Conclusion. When deciding on the type of business to buy it is imperative to consider the lifestyle each type of business will bring to you and your family. Every industry comes with its own considerations to take into account. Some example industries and considerations are as follows:
- The food industry has an element of fun, a social aspect and can be very profitable, but it also includes long hours and daily service.
- Service based businesses have a more flexible schedule structure and can be provided from the home or a small office, but the more hours you put in, the more profitable it can be.
- The retail industry offers variable hours and overhead depending on the product but can rely on trend driven profits.
If you are considering becoming a business owner Transworld can help. Our brokers will work through the decision process and steer you in a direction that is suitable for your life, needs, and desires. For more information on Transworld's service offerings please visit our website at www.tworlddenver.com or schedule a consultation today!
Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master's Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.