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
- Relationships: You will be able to benefit from an established business network of customers and suppliers.
- Brand :When you buy a business, you will already be working with an existing reputation and image.
- 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.
- No Autonomy: May be incompatible with your goal of having complete autonomy of the business.
- Existing Problems: You may inherit existing financial or legal problems.
- Cost: It may be more expensive to buy a business than starting one.
- Support: You may be able to get continued management assistance or training and support.
- Brand: Market exposure is higher due to national marketing and established brand.
- Cost: Lower start up costs.
- No Autonomy: You will be restricted with operational guidelines, choice of suppliers and products.
- Ongoing Cost: There may be ongoing franchise fees and royalties
- Marketing: If buying a franchise, adverse performance or image from other franchisees could negatively impact you
Starting a Business
- Autonomy: You have complete control over the business
- Cost: In general, starting a business will cost less than buying a business.
- Risk: Banks and investor may be less inclined to finance a new business
- Loss: Don’t expect a quick profit. Research shows most new businesses make a loss in the initial stages.
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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.