Entrepreneurs who don’t like the restrictions of a franchise arrangement have two additional options: to purchase an existing freestanding business or to start a new company from scratch.
Each has its advantages – and drawbacks. Whatever you decide to do, do not move ahead until you research the subject, talk with business owners who have followed this route, consult an attorney about the legal aspects and speak with your accountant regarding financing.
Many small business owners prefer the independence inherent in a freestanding company. Besides having a ready-made customer base, other benefits may include experienced employees, an established operational infrastructure, and often, a suitable lease arrangement.
One potential drawback relates to the firm’s day-to-day operations. If you plan to change the existing structure, you may face repercussions. Altering corporate policy, firing and hiring staff, and shuffling the management hierarchy can cost clients and customers who don’t like the new look.
If you do decide to purchase an existing business, use the following guidelines:
To be thorough in your research, many financial experts suggest enlisting professional help to price and evaluate the company you’re investigating. A number of models exist, chief among them:
SCORE offers a downloadable fair market value tool on its website if you’d like to tackle a preliminary assessment on your own.
It is strongly advisable to hire an attorney before closing the deal on your new business. A lawyer will help you gather and review mandated documentation, draw up lease arrangements and arrange promissory notes, if needed. Other details an attorney may address include:
For entrepreneurs who like to blaze trails and make their own rules, a start-up company may offer the perfect fit. A word of caution, though – while your ideas for a new product or service may be stellar, take the time to put together a business checklist before forging ahead.
At minimum, your checklist should address the following questions:
Once you’ve established the basics, continue researching the market to help identify your target audience and ensure that your area can support the company.
The next step is to develop a business plan. While this need not be elaborate, an organized strategy for building your firm is essential. You can always make adjustments as you formulate your ideas.
A basic business plan should:
Since most new businesses fail, your decision either to buy a venture or to grow one should be grounded in reality. Before you quit your day job, make sure you’re in the financial position to move ahead with your entrepreneurial goals. If so, remain positive, patient and tenacious – landing the big clients or establishing a large customer base takes time.
The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.