Starting a Small Business - Should You Purchase a Franchise Or Develop the Business From Scratch

One of the biggest decisions you make when starting a small business is whether or not to purchase a franchise or start the business from scratch. There are pros and cons for both approaches and there is no easy way to chose between them. Much of the focus of your decision will depend ultimately on your business experience, confidence level, amount of money you have available to invest, and personality. Here are a few tips you can use to decide between purchasing a franchise and going it alone.

• Take a look at your own personality and desire for being totally independent. If you purchase a franchise, you will be required to follow certain requirements and meet specific milestones in order to be considered in good standing. If you have a burning desire to "do your own thing" and not have to answer to anyone else, then stay away from franchising. Each franchisor is different, but they all require a certain amount of conformity among the franchisees.

• Examine your own level of management expertise and experience. If you are a novice to management and business in general, you should seriously consider going with a franchisee. Most franchisors offer a proven business plan that has been successful for others, and often you can just plug it into your business enterprise and get off and running quickly. They also offer marketing materials at a discount price and can provide discounts on necessities such as insurance, payroll services, and computer support. If you have a fair amount of management and business experience and expertise, you may want to consider starting the business from scratch.

• Determine how much money you have to dedicate to the new business. Franchisees will require a fee to purchase the right to operate it plus monthly royalty fees based on gross sales. This can add up to a fairly large amount of money depending on the franchise network. If you chose to start the business on your own, you will require fewer resources to begin with but run the risk of expending more down the road if you have a faulty and unproven business plan.

• If you decide to consider the franchise option, check them out carefully. You want to focus on a national or international franchise network that has good brand recognition. Pretend you are a customer and go through all of the steps required to check out their approach. As a customer, were you pleased with the way you were treated or quality of the product or service, etc. Ask the franchisor to give you names and phone numbers of franchise owners so you can speak with them about their experiences.

• You can find information on line that will give you an idea of how successful a franchisor has been. You can examine the franchisee growth rate over time and check to see how many have gone bankrupt. You will also want to know the franchise size (how many people or land area make up a franchise territory) and if you will need to share a large area with other franchisees.

• If you decide to go it alone, make sure you identify ways to promote yourself in the community. You have a better chance of success if you can sell the idea that you are better than a chain or franchise because of your identification with the community and ability to provide a personal touch to your product or service.

These are just a few things you need to take into consideration when deciding whether or not to purchase a franchise. You need to take this decision very seriously because it will have a profound impact on the way you develop the business and the things you prioritize.

Steven Watson, PhD has been a small business owner for over 8 years and a manager for 18 years. He currently owns a home health agency and a copywriting and resume company in the Tallahassee, Fl area. Steven has a special interest in helping new entrepreneurs get their businesses started successfully and learn the management skills needed to fulfill their career goals.

Useful Resources
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