Many people’s goal is to start a business of their own for the benefit of themselves and their families. A good question to ask first is, should I try to start a business from scratch or possibly buy an existing business? Most everyone thinks that opening a brand new business is the thing they should do, and the idea of purchasing an existing business never even enters their minds, but it should.
Starting a business is challenging and has many hurdles to overcome. However, many existing companies might be what a new owner is looking for. An existing business may, at the least, come with some of their initial problems already overcome, things such as marketing challenges, immediate cash flow, a customer base (no matter the size), and established employees. These, and more, are real issues with building a business from scratch and might hurt your chances of future success.
On the negative side, purchasing an existing business may be more expensive initially then starting from scratch. If the deal is negotiated well, however, it can be structured so that you can take it over, and take some time to finalize your ownership but also stretch out your expenses. It is a fact that banks, business loan companies, and investors are much more inclined to invest money in an on-going business than a complete startup. This may get you the growth capital needed to grow and implement your new ideas to make the business your own.
Also, buying a business may give the new owner legal rights, such as patents or copyrights, which can be very profitable. A small business lawyer should be perceived as your business partner, at least initially, because they can assist with your needs in the beginning.
Should I Consider buying a Franchise Business?
Buying a franchise may be the perfect middle ground between starting a business from scratch and acquiring an existing business. When you buy into a franchise opportunity, you are buying the license to use a parent company’s trademarks, systems, and ways of doing business. Many of the startup issues are already overcome, and the new owner won’t have the problems nor have to spend the money to solve them.
You also receive training and ongoing support from your parent company. In return, you pay a franchise fee to launch your location and pay ongoing fees and royalties. Buying a franchise can cost as little as $10,000 or cost up to several million dollars, making this method suitable for a vast range of budgets. If there is a franchise that you have experience in and fits with what you want to own, it should certainly be considered.
As a franchise proprietor, you’ll be growing your new franchise from the ground up. Still, the franchisor will help with everything from choosing a location to buying inventory and training employees. This is always helpful if you lack experience in one or more areas of running a business, but is also useful even if you have years of experience. The franchise has spent years and sometimes decades perfecting their business model, which could raise your chances of success significantly.
A business contract attorney can be invaluable in starting a franchise, as there may be salient points that they are familiar with, and the buyer may not be. The franchise will have a particular way of doing business (likely for a good reason), and you will have to follow those paths. A business lawyer will offer sound counsel in what guidelines need to be followed and even negotiate some aspects of the franchise agreement.
Also, if the buyer knows they want their own business, but does not know what type of business to start, there are many franchises to choose from in all areas of service or manufacturing.
There are three common issues to consider when either buying a business or a franchise:
● Quantify your investment – Review your financial landscape and decide how much you’re willing to spend to purchase — and ultimately manage — the business. Going over your initial finances is probably one of the most important aspects of buying a business or a franchise. This will help you determine what type of companies or brands are best for your budget.
● Consider your talents and lifestyle – Be very honest about your skills and experience, as they can help you eliminate unrealistic business choices. For example, if you prefer hands-on assistance, then franchising might be best for you. On the contrary, if you’re an experienced business owner, you may want to consider buying an existing business.
● Review the full landscape – Look at the existing infrastructure and make sure you understand everything that comes with purchasing an existing business and a franchise. Don’t be afraid to ask questions about contracts, leases, existing cash flow, and inventory. This is the area in which a business law attorney can help you the most. You need a law firm that helps businesses of all sizes and knows the questions to ask to makes sure that the new owner gets the correct answers. The more you know, the better equipped you’ll be to make a sound decision.
Whether you decide to start from scratch or purchase an existing brand or franchise, the road is never easy when it comes to running a business. Having a good business lawyer by your side, especially when making initial decisions, will always help you better succeed in your entrepreneurial career.
