When thinking of starting a business, most new entrepreneurs first impulse is to build a business from the ground up. However, one very prominent and less risky way to enter the world of entrepreneurship is buying a business that already exists. This can be through a straight acquisition of a stand alone business or by buying into a franchise. There are tons of tools that exists to help you determine if this is the right step for you. Here are some things for your to consider if you are taking the acquisition route into entrepreneurship.
- The value of the brand – One of the most enticing reasons to buy an existing business or franchise is that you do not have to start from scratch. However, if the business is being sold has a bad reputation or horrible record keeping practices, it may not provide any value to you moving forward. Take into account how the businesses current customers view the brand to help you determine if value actually exists. If you buy into a business where the value to customers is non-existent, you are essentially going to have to start from scratch to build up your customer base regardless.
- Training or Support – Some owners and all franchise operations offer to provide training to help you jump into the business with as few mistakes as possible. Be sure to choose a business acquisition that will give you the education you need on processes, suppliers, current marketing strategies, financing and more. This will allow for a smooth transition of ownership and prepare you to handle many of the problems you will face as an entrepreneur.
- Ongoing Costs – While rare in small business acquisitions, but a staple in the franchise business, paying a monthly or annual “royalty fee” can be an ongoing cost for your business. While it may be called by a different name depending upon the seller, you need to be mindful that entering into an agreement may have additional ongoing fees beyond the closing of the sale. Be sure you are clear about how much these fees are (if they are applicable to your transaction) and you account for this additional cost in your regular accounting.
While this list is not exhaustive of all the items you should take into account when acquiring or buying a franchise of a new business, it is a good start. For more information on things to consider, contact me at www.werkflow.co or firstname.lastname@example.org.