“I work really hard but all I’m doing is making someone else rich!” - we’ve all heard it and maybe you’ve even said it yourself. Perhaps it’s time to go out on your own and be in control of your own destiny. You may be seeking the independence and flexibility of working your own hours and taking holidays when you feel like it. You may have had a change in family circumstances and want to run a home-based business while you care for your children. You may be a budding entrepreneur planning to build an empire or you may be looking for a laidback lifestyle while running a business from the beach. Or perhaps you are looking for a franchise for sale? In any event, there are a number of variables you need to consider.
The first decision is whether to start from scratch or buy an existing business and will depend on the type of business that is of interest to you. The deliberations will be based on the level of investment you are prepared to make, the degree of risk you are prepared to accept and the short, medium and long term goals you have for the business.
A start-up may seem to be a comparatively inexpensive way of getting into business but you will need to develop a customer base, negotiate supplier agreements and build credibility. The likely performance of a start-up will be based on projections and ‘best guest’ scenarios and will require some fairly intensive homework to quantify. It is vital that you consider all the relevant information so that the money you save up front doesn’t cost you a fortune in the end – there are far too many instances of unprepared investors making this fatal mistake.
A typical example is the budding restaurateur who had found the perfect location for his new venture. He invested over $1million in an elaborate fit-out, which took three months to complete, and then another six months to attract sufficient customers to start making a profit. He was forced to sell two years later, and the realizable value of the business as a going concern was then only $400,000 – a very expensive lesson learned.
An existing business will have the benefits of an existing infrastructure – secure lease, store fit-out, operational plant and equipment, established customer base, supplier networks, staff relationships etc., and a track record that will give you an indication of its viability and potential. The amount you pay for an existing business will be a function of its financial performance, the value of the capital assets and a range of other variables that are often collectively referred to as goodwill. You should seek advice from professional business brokers regarding the information that you will need to make an offer.
Then there are franchises for sale which can be either start-ups or existing re-sales. Good franchises will have proven systems; group purchasing and marketing discounts; initial and ongoing training and development, etc. Franchises are usually regarded as less risky than stand-alone businesses, especially for first time buyers, as they offer training, support and proven systems. However, non-franchised businesses are usually more flexible, allowing complete independence and unlimited scope for diversification. It is important to be realistic about your personal strengths and weaknesses and to understand how your own mix of entrepreneurial spirit and need for support will impact on the business you are considering.