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An
Overview of Today's Business Opportunity
Market
By:
Richard Parker: Author of
How To Buy A Good Business At A Great
Price ©
 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 will 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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