So you are interested in becoming a business owner? Hello, on behalf of Florida Business Exchange, we would like to welcome you to ‘Deciding to become a business owner’. This is one in a series of videos from Florida Business Exchange that cover the basic steps you will encounter in becoming a business owner.
When you decide to become a business owner, you will be faced with certain decisions that will define the make-up of your business. Three immediate considerations will be:
Each of these has its own advantages and disadvantages depending on the type of industry, geographic location, and other factors. Let’s discuss them.
Starting a business from scratch can take incredible time and detail. You must be sure you have a business that will compete over time.
First, you must be sure that there is a market in the community, region, or world that will accept another producer or service. This may take surveys and studies to see if you have a product or service that is new, needed, or offers better value than the current market place.
Second, you will need to be completely aware of the time it will take to market the business, the costs and working capital that will be needed to meet the forecasted startup date.
And finally, have the expertise and skills to service all the customer’s needs and issues.
Most of the time, a detailed business plan is necessary to detail how a new business will meet start up obligations and future debt with year over year growth. Financial institutions will always require a Business Plan if financing is involved.
Will you have the time to support all of these activities?
Will you be ready on the forecasted startup date of your Business Plan?
If there is construction needed, will you be there to make sure that all city, state, and federal requirements are met?
You will need to review your strengths and weaknesses to be sure that you are capable of meeting the requirements of starting a new business. Your days may be as diverse as understanding impact fees prior to construction, presenting a business plan to a financial group, meeting customers that are looking for a change in your offering, and dealing with the state on licensing issues.
If you decide to purchase an existing business, the road becomes a little easier. Sales and marketing data is readily available and normally you can view year over year results. You can see the business cost factors and how they drive the bottom line results. You can see whether there will be growth over time and often predict where the business is heading.
You always need to consider your past experience and your skill set to the type of business you are purchasing. For instance, a purely analytical person who is tremendous at engineering or with financials, but very uncomfortable around people, may not want to consider buying a business that stages large banquets.
In the end, you always want to be sure that the purchase of a business meets the “acid test”. The acid test requisites are: Can it pay an income commensurate with industry standards?
Can it pay the debt service?
Can it return the initial investment within a reasonable time frame?
And lastly, Can it give you a return on your original investment?
It is very important to remember that this purchase is not only an investment, but your livelihood. You need to look at the business very closely during the “due diligence” process.
You need every question answered to your complete satisfaction before moving on to the closing phase. Always use professional assistance where applicable, like an accountant and a legal advisor to help complete the process.
REMEMBER THIS: There is only one reason to buy a business, that is, to SELL IT in the future.
So many times we hear a business owner say that they had their best years three or four years ago….and they always say that they should have sold it during that period. The value of the business would have been much higher.
Always have an anticipated EXIT plan and work towards it….Focus on growth.
Be ready when your time comes, we can help you with that.
Buying a franchise business is a viable way to get into an industry without the necessary experience in that desired industry. The process is much the same as buying an existing business that we previously discussed. You have a group of existing franchisees that will give you some insight into the franchisor, the industry, and what it takes to get started. You should definitely use these franchisees to get a better understanding of the positives and negatives with this opportunity.
Some obvious positives in buying a franchise are brand recognition, established market presence, comprehensive training by the franchisor, and pre-established supply lines. Some more benefits include; the purchasing power of a larger buying group, easier and faster start-up, and on-going assistance from the franchisor. These are all benefits that are not available in the beginning when starting a business from scratch.
There are some areas that need special attention when looking at franchises. Read the Franchise Disclosure Agreement very carefully and ask questions. All Agreements are not created equally. Some Franchise Agreements are much more stringent and controlling than others and don’t give the franchisee the same ability to succeed. Also be sure the location available is really right for your success, get a second opinion to help you with these decisions. Always seek the advice of Legal and Accounting specialists.
Again, on behalf of Florida Business Exchange, I would like to thank you for listening. If you have any questions regarding purchasing a business, please do not hesitate to contact your Florida Business Exchange intermediary for a complimentary consultation. I wish you the best of luck in pursuing your new dreams, and having our team of professionals helping you through the process.