One of the questions we always get from clients who are ready to follow their dream of owning their own business is, should I buy a business, franchise one or start from scratch?

In this article we consider the pros and con of each model:

Buying a business

Advantage

  1. Relationships: You will be able to benefit from an established business network of customers and suppliers.
  2. Brand :When you buy a business, you will already be working with an existing reputation and image.
  3. Risk: Banks or investors may find it far less risky in lending an initial load to a proven concept and established business with previous financial records that can give an estimate of running costs and profits.

Disadvantage

  1. No Autonomy: May be incompatible with your goal of having complete autonomy of the business.
  2. Existing Problems: You may inherit existing financial or legal problems.
  3. Cost: It may be more expensive to buy a business than starting one.

Franchise

Advantage

  1. Support: You may be able to get continued management assistance or training and support.
  2. Brand: Market exposure is higher due to national marketing and established brand.
  3. Cost: Lower start up costs.


Disadvantage

  1. No Autonomy: You will be restricted with operational guidelines, choice of suppliers and products.
  2. Ongoing Cost: There may be ongoing franchise fees and royalties
  3. Marketing: If buying a franchise, adverse performance or image from other franchisees could negatively impact you

Starting a Business

Advantage

  1. Autonomy: You have complete control over the business
  2. Cost: In general, starting a business will cost less than buying a business.

Disadvantage

  1. Risk: Banks and investor may be less inclined to finance a new business
  2. Loss: Don’t expect a quick profit. Research shows most new businesses make a loss in the initial stages.

Have you decided whether you want to start, buy or franchise your business? Sign up for our newsletter to receive checklists of the top legal considerations in starting a business, buying a business or buying a franchise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Please contact Verity Law for further advice.