Entrepreneurship is an appealing endeavor. It is a shift away from the downside of employment and presents an excellent opportunity to earn more, thereby improving your quality of life. However, starting a business is not an activity that can be taken lightly as it demands self-discipline, dedication and a desire to succeed.
Business start up options
The Franchise Option
There are several business options that you can consider. One approach can be purchasing a franchise. Franchises are significantly becoming one of the most common types of start-ups that people decide to establish. This is because of the advantages accrued to them, for instance, the reduction of risks. Since the business has already been established, the risks are less. Also, you will have a network of other franchisees providing you with the much-needed advice and mentorship.
The franchisor in the franchise business provides the new owner with guidelines on how to conduct business successfully. This on-going guidance and assistance come for a fee that will be paid to the franchisor. As a new business venture, franchises offer the independence of owning a business yet at the same time providing the benefits of an established business network. The franchisor provides training that will expose you to the strategies that will ensure your success in the market. Moreover, it may cost less to purchase a franchise.
The franchise business has its fair share of disadvantages. For instance, the business structure and rules associated with this line of business may be too rigid, thereby hindering your ability to work flexibly at your pace. The agreement you enter with the franchisor dictates how you will manage the business. Therefore there is no room for creativity. Also, the poor performance of other franchises can negatively affect your business reputation.
Purchasing an Existing Business
There are some who opt to forego the time-consuming endeavor of starting a new business by buying an existing business. This can be a good option, considering that an existing business comes with its established customer base, human resource, and a trading record. Therefore, the new owner does not need to delve into the work of building a client base from scratch, developing a working relationship with suppliers or the logistics of finding the right staff. However, this does not mean that buying an existing business is simple. On the contrary, it is a time-consuming and complicated process.
There are three main disadvantages of buying an already established business. First, if the business is already running as a successful venture, then it may be costly to purchase. The level of achievement has already been established, and the new owner will have to consider the nature of improvements that they need to make. This is different from starting a start-up business as in a start-up; the entrepreneur determines their level of achievement. For the new owner, there is always the risk that the company may not run as successfully as they anticipated. Also, external factors may pose a threat to the business, for example, stiff competition or a decline in the market.
Buying an existing business requires a lot of research on your part. This is because you will be inheriting the strengths, weaknesses and potential threats that come with the firm. For example, the business may be poorly managed or consisting of low staff morale. Inheriting these problems will require costly changes to ensure that the firm does not fail. You need to make sure that the business is feasible and already has a well-developed market for its commodities.
Establishing a New Business
Starting a new business requires creativity, hard work, and effective planning. Undertaking this venture without conducting market research is dangerous and could lead to a disaster. Through the market research, you will be able to identify the types of market interested in your product, the size of this market, key competitors and whether the market is growing or not.
Aside from the market, you need to consider the type of legal structure that you prefer. This decision is rather important as it will affect the firm’s approach to tax and administration. Also, it will determine the willingness of finance providers to fund the business.
A new company needs to consider various factors. They include a source of funding, legal frameworks and the number of staffs to be hired. Other factors to consider are the marketing strategy, sources of raw materials to be used for production and location.
There are various advantages to this venture. First, the new business is free to establish its name as there is no history to tarnish its image in the market. This new business comes with a level of independence as you are free to determine how far it will go, what you need and your target market.
Starting a new business requires high commitment, time and energy. This can be stressful to some entrepreneurs and can also be a point of discouragement. Also, dealing with the legalities surrounding the new business can be a daunting task that requires the services of a lawyer.
Key disadvantages surrounding a new business include the high risks involved. Overcoming these risks requires effective leadership and the owner’s business talents. Other problems include delayed profitability and financing challenges. Obtaining the necessary capital to fund the new venture can be a challenge and the owner may have to outsource bank overdraft or loans. In cases where the market is not well established, it may take time before the business starts making profits.
In conclusion, each start-up option comes with its set of risks and uncertainties. Therefore, it is up to the entrepreneur to determine which option they prefer and the pros and cons that come with each endeavor. Over 300 businesses end up closing down every week. This means that around 17,000 businesses fail on an annual basis. Therefore it is up to the new entrepreneur to evaluate the risks against the potential rewards, in light of the danger of a business failure.
With the above information, starting a business can be made much easier since you will have a better understanding of all the available options.
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