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Is Your New Year's Resolution to Start a Business?

by: Prefcapital
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According to Intuit's Just Start survey, 72% of Americans dream about starting their own business. This is an interesting, but not surprising statistics since it goes along with the general entrepreneurial culture in this country. With the New Year upon us, many people have made their resolutions to bring their small business dream into reality this year. What are the main choices that they have?

There are three main ways: start from scratch, buy a franchise or buy an existing company. Each one of these options has its advantages and disadvantages that we review below.

Start from Scratch
This is a perfect choice for someone that has a business idea and is prepared to work through the startup stages of the business including initial setup, establishing customer base, putting in place a business operating model, and brining to life your own marketing plan. This is an exciting option for someone who doesn't like to report to a franchisor organization, even though you would be wrong to believe that you would be your own boss. Your customers will actually become your bosses as you answer to their demands and try to satisfy their wishes.

This is one of the riskiest ways to start a new business, but the success could be quite gratifying. Your business model options are wide-open: are you looking for a home-based business, a retail store, an internet business, a service company - the choice is yours! On the downside, you have to be sure that you have the discipline to start a business. In many cases it's better to partner up with someone you know. Obtaining business financing for a startup business might be tougher than for the other options, but if you have previous management or business ownership experience, good credit, a sizable cash injection and some additional collateral, you should be in a good shape.

Buy a Franchise
Buying a franchise is an excellent way to build on a known business model. If you would like to minimize the start-up related items and would rather focus on running a business, franchise might be the best choice for you. By buying a franchise, you typically get consumer name recognition and support from your franchisor that is very important when you are just starting. Your chances of success are definitely higher with a franchise since in most cases it has been tested by other franchisees and have a national or regional marketing program.

Many mistakenly think that if they decide to go with a franchise, their choices will be extremely limited to just a few industries. However, today franchises are available in all imaginable industries from cleaning and food services to tutoring and auto shops. On the downside, you will have to pay a franchise fee, royalties, follow the system and answer to your franchisor. However, franchise fee and royalties are a cost of doing business and a fee for training you will receive. Following a system and answering to someone might be appealing to many entrepreneurs. Additionally, obtaining business financing might be easier for a franchise than for a startup company, and that might be an important consideration for many.

Buy an Existing Company
Buying an existing company or an existing franchise is a great solutions for people that would like to build there success by avoiding all the issues that startup companies face including building an initial customer base, setting up operations, establishing vendor/supplier relationships, and many others. You certainly have to be careful when looking at an existing company and the reasons they are being sold. Get as much information about the industry and the trends to understand how to maintain and grow the company. One drawback is that it might take you some time to find the right company, so you have to be patient to do research and analyze potential candidates. It might be a good idea to seek professional assistance in analyzing your target company's financials if you do not have a strong financial background.

Clearly each path you take in starting a business has its advantages and disadvantages that have to be carefully weighted against your personal preferences, experience, and financial capabilities. Whichever path you take, you have to be prepared for an exciting time in your life. Make sure you get support of your family and friends and enjoy your road to success!

About the Author

Tiana Nelson, CMA, CFM is a Business Development Officer at Preferred Capital Alliance, Inc, a Better Business Bureau accredited business finance consulting company that helps small- and medium-size businesses obtain financing to start and expand their operations.

Is Your New Year's Resolution to Start a Business?

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