What is the Best Way To Start a New Business
If one of your New Year’s resolutions was to own your own business in the near future, now is a great time to take action on that goal. Overall, the economy remains strong, and there are many sectors that are experiencing healthy growth. This provides ample opportunity for aspiring entrepreneurs to capitalize on the current economic conditions and finally take ownership of their career.
If you are looking to get started in business this year, there are numerous directions you can go. You can start a traditional brick-and-mortar business, or you could start a low-overhead business from home. You could start a business on your own from scratch, start a new franchise business by partnering with an established brand, or you could buy an existing business that is for sale. It is an individual choice and the right direction to go depends on several factors among the most important being your skillset, what you enjoy doing, and the funds you have to work with.
For those who have the finances, it usually comes down to franchising or purchasing an existing business. You could still start a low-cost business (e.g., for under $500) even if you have the capital to invest in a larger venture, but these types of businesses generally take a long time to turn a high enough profit to provide a decent living for you and your family.
If you currently have a full-time job that you love and want to keep, and you are just looking for something to start on the side, then this might be the way to go. However, if you are looking to make a clean break and jump into entrepreneurship with both feet, then you will need something that provides a strong return on investment in a relatively short period of time.
Franchising vs. Buying an Existing Business: Whether you are considering starting a new franchise business or purchasing a business that is already operational, you are looking at investing a fairly large amount of capital.
The Franchise Route: Most franchises involve an upfront investment of tens of thousands of dollars for franchise fees and the other expenses associated with the particular business. The overall investment required depends on the industry you are going into.
For example, if you are opening a fast food franchise, there will be high overhead costs to rent the location, purchase equipment, etc. This may run well into the six figures. On the other hand, if you are starting a franchise in the home care industry, you may be able to get by for under $50,000, because all you need is an office and some staff to make in-home visits.
In exchange for your investment into a new franchise, you receive training and ongoing support from the franchisor. This support can be invaluable, especially during the early months when you are just getting started. If you follow the blueprint the franchisor lays out for you, you may be able to reach the break-even point and start turning a profit within six months to a year. In the meantime, you need to have enough savings/income from other sources to live on while you build your business. And of course, there is no guarantee that you will ever turn a profit so be sure to do your due diligence and study the franchise concept carefully if you decide to go this route.
The Existing Business Route: Purchasing an established business also involves a large upfront investment. This, again, will depend on the type of business, as well as other factors such as assets, liabilities, and cashflow. Typically, you can expect to pay more for a business that is already in operation, but this comes with a major benefit being immediate profitability. If you find the right business, it will already be turning a healthy profit, and you will be able to step in and earn a good living from Day 1.
This may sound great, and it is. But there is one caveat. There is no guarantee that a business, which is profitable today and will continue to be profitable tomorrow. There are numerous factors that go into the success of a business, among them include the future trajectory of the business (i.e., are they growing or declining?), industry trends, the potential for future litigation, how they stack up against the competition, the potential to gain additional market share and/or add new products/services, and many others.
Perhaps the most important factor in the success of a business is the person at the top. The owner of the business needs to have the right skillset and a good working knowledge of the industry. The owner should also be excited about the business they are going into. You will be investing a major percentage of your time into this, and if you get into it just for the money, you may soon find out that you made a major mistake.
The Importance of Professional Guidance: If you decide go the route of purchasing an established and profitable business, which business to buy will be one of the most important decisions you will ever make. For this reason, it makes good sense to work with a professional who understands the process. Business brokers, also known as business intermediaries, work with numerous buyers and sellers each year, and they know how to match entrepreneurs with the right business. Working with a business broker can save you time and help you avoid countless headaches while providing the guidance you need to find the business that best suits your passion, skills, and budget.