The game plan is changing today with people realizing that a typical corporation will not provide job security and offer career growth that used to be expected in prior years. The global economic meltdown has limited options for employees today. Today it is not uncommon to find hundreds or thousands of resumes landing on a hiring manager's desk. Overqualified people are applying for jobs well beneath their skill levels. Companies are downsizing staff and adding extra work on remaining staff. Stress is at an all-time high. Therefore it is no wonder that individuals are resorting to entrepreneurial activities.
So we know the "Why" aspect of starting a business but what about the "What" and "How" aspect? Let's consider first the main options:
Normally a business has four things to sell to the potential buyer: customer base, staff, processes, and assets. For example, consider a service oriented firm. Sales prices for various industries will differ and the potential buyer will need to know the sales formula specific to that industry. For instance, the formula for that industry might be that sales will be 1x annual revenue. So, if the firm generates $500,000 of billings then the asking price is also $500,000. The price may go up or down based upon perceived qualitative factors. The owner may state that the employees are long time staff with the necessary credentials for the success of the firm. Or maybe the firm has multiple year contracts with clients that indicate long-term relationships. Or perhaps the business is located in a premium area that has a large market of potential customers to be served.
Whatever the price is though, it is going to be expensive. It is going to require a lot of capital to get started and then there is the risk of losing existing customers if the owner leaves. There is also the risk of employees leaving especially if they are valuable to the brand of the firm. Employees may leave for a variety of reasons including perceived fear with the new organizational change. The buyer is going to have to perform a lot of due diligence and ask the right questions to obtain assurance that the business has a very high probability of succeeding.
Start a New Business
Starting a new business provides a much different type of risk. The upfront capital is much lower but there are the costs associated with starting from scratch and figuring out all the steps to get established, branded, and building a customer base. During the buildup stage, your own salary is going to be low or even nonexistent as you reinvest in the business. Marketing is the key to growing the business and developing the brand and marketing can be very expensive especially if it's not an area that the entrepreneur has a lot of experience with. Without a doubt, having an established network in the business will be essential to get the business off the ground. Therefore, this option is best suited for an individual who wants to continue in the same industry as opposed to starting a brand new business in a new industry.
Buy a Franchise
Buying into a franchise is a good option for entrepreneurs who want to follow a proven brand and business model. A streamlined system is in place to follow step-by-step so that success is much higher than with starting a business with a new brand. The main drawback of course is that the entrepreneur is generally limited with creative options and there are heavy fees including royalty fees and start-up costs. Additionally, franchisers generally want to see franchisees having a minimum level of liquid assets, in other words a lot of cash. For the entrepreneur with limited funds this is a difficult option but this can be a good avenue to pursue.
Start an Online Business
Fortunately we live in an age where starting a business does not have to be complicated or expensive. Online businesses offer the average person an opportunity to start a home based business on the side or even full-time with much lower levels of start-up capital. There are costs of course, which usually includes domain name registration, web hosting, marketing fees, and product costs. The main key to success is to follow an online mentor who has a turnkey system in place to maximize revenues and minimize expenses. The system should also have standard technological processes in place and training available in the form of webinars, forums, and videos. The biggest obstacle for new entrepreneurs is the area of marketing the business. Online marketing is pretty unique and there are literally dozens of marketing options online including free and fee-based expenses which can escalate if controls are not established. Again, finding the right online mentor will mitigate these areas of concern.
Summary
Each of the different options has their own benefits and risks. The bottom line is that a business venture should not be taken lightly. The rewards are certainly there but so are the risks. Each entrepreneur should consider their own risk tolerance and to follow an option that makes the most sense for their own personal situation. Above all, the entrepreneur should have passion and commitment to follow their dreams.
So we know the "Why" aspect of starting a business but what about the "What" and "How" aspect? Let's consider first the main options:
- Buy an existing business (typically brick and mortar)
- Start a new business (typically brick and mortar or home based)
- Buy a franchise
- Start an online business
Normally a business has four things to sell to the potential buyer: customer base, staff, processes, and assets. For example, consider a service oriented firm. Sales prices for various industries will differ and the potential buyer will need to know the sales formula specific to that industry. For instance, the formula for that industry might be that sales will be 1x annual revenue. So, if the firm generates $500,000 of billings then the asking price is also $500,000. The price may go up or down based upon perceived qualitative factors. The owner may state that the employees are long time staff with the necessary credentials for the success of the firm. Or maybe the firm has multiple year contracts with clients that indicate long-term relationships. Or perhaps the business is located in a premium area that has a large market of potential customers to be served.
Whatever the price is though, it is going to be expensive. It is going to require a lot of capital to get started and then there is the risk of losing existing customers if the owner leaves. There is also the risk of employees leaving especially if they are valuable to the brand of the firm. Employees may leave for a variety of reasons including perceived fear with the new organizational change. The buyer is going to have to perform a lot of due diligence and ask the right questions to obtain assurance that the business has a very high probability of succeeding.
Start a New Business
Starting a new business provides a much different type of risk. The upfront capital is much lower but there are the costs associated with starting from scratch and figuring out all the steps to get established, branded, and building a customer base. During the buildup stage, your own salary is going to be low or even nonexistent as you reinvest in the business. Marketing is the key to growing the business and developing the brand and marketing can be very expensive especially if it's not an area that the entrepreneur has a lot of experience with. Without a doubt, having an established network in the business will be essential to get the business off the ground. Therefore, this option is best suited for an individual who wants to continue in the same industry as opposed to starting a brand new business in a new industry.
Buy a Franchise
Buying into a franchise is a good option for entrepreneurs who want to follow a proven brand and business model. A streamlined system is in place to follow step-by-step so that success is much higher than with starting a business with a new brand. The main drawback of course is that the entrepreneur is generally limited with creative options and there are heavy fees including royalty fees and start-up costs. Additionally, franchisers generally want to see franchisees having a minimum level of liquid assets, in other words a lot of cash. For the entrepreneur with limited funds this is a difficult option but this can be a good avenue to pursue.
Start an Online Business
Fortunately we live in an age where starting a business does not have to be complicated or expensive. Online businesses offer the average person an opportunity to start a home based business on the side or even full-time with much lower levels of start-up capital. There are costs of course, which usually includes domain name registration, web hosting, marketing fees, and product costs. The main key to success is to follow an online mentor who has a turnkey system in place to maximize revenues and minimize expenses. The system should also have standard technological processes in place and training available in the form of webinars, forums, and videos. The biggest obstacle for new entrepreneurs is the area of marketing the business. Online marketing is pretty unique and there are literally dozens of marketing options online including free and fee-based expenses which can escalate if controls are not established. Again, finding the right online mentor will mitigate these areas of concern.
Summary
Each of the different options has their own benefits and risks. The bottom line is that a business venture should not be taken lightly. The rewards are certainly there but so are the risks. Each entrepreneur should consider their own risk tolerance and to follow an option that makes the most sense for their own personal situation. Above all, the entrepreneur should have passion and commitment to follow their dreams.
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