By Leslie Kuban
Now that we’ve explored the common traits of the successfully self-employed, let’s dive into the different types of business ownership opportunities and which one might best suit you.
For simplicity, let’s stick with four pathways to entrepreneurial success. Each has unique pros and cons. The true measure of viability for you is weighing each to determine the best solution for your unique skills, budget, lifestyle, signature talents and goals.
Starting a new business completely from scratch is the most pure and entrepreneurial of the four pathways. This is your chance to turn your idea into action. You’ll have total control, make all the decisions, enjoy unlimited creative space and follow your passion. There are plenty of inexpensive or free mentoring resources to help startups get started.
On the other hand, starting from scratch takes time. Ramp up can be slow. You’ll need to create all the many necessary business systems, so the business operates and grows successfully. Startups face more challenges with funding because they’re untested. Because of these and many other reasons, startups have the highest failure rate of any of the business opportunities we’re discussing today.
This category encompasses any business opportunity where you are the sole rainmaker and expert in the business. The business is based on your skills, relationships, and salesmanship. You can start right away because your time and talents are the product you’re offering. Whether it be offering advice, providing services or direct selling of a product as an independent contractor. Costs are low because there’s little if any overhead and no employees.
That doesn’t mean you have to go it alone. There are professional organizations and even consortiums of business consultants, like ITB Partners, that can assist you in cultivating your network and growing your personal brand.
Independent consultants are the everything in their business. Your pipeline of business is only as strong as your current network. Liability can be an issue. Competition is stiff. Not only must you constantly sell yourself, negotiate contracts, manage finances and taxes and create all the business systems, when you’re ready to sell the business, the asset is often you – the consultant. Once you’re gone, often so is your business.
Buy an Existing Business
Buying someone else’s up and running business can be a lucrative avenue when cash flow is the primary concern. An established book of business, trained employees and systems in place can mean success from day one. Plus, discerning buyers have the opportunity to study actual financial history.
However, this is often the costliest of all ventures because a good business with cash flow, an existing customer base, and trained employees will be priced at a multiple of earnings. The cost may be driven even higher when there is a need to upgrade the existing equipment or inventory. Finally, while there are lots of good reasons and it’s unfair to presume the seller is trying to dump a bad business, uncovering possible hidden seller motives can be tricky.
Invest in a Franchise
The franchise model is often referred to as the perfect hybrid between employed life and true entrepreneurship. No experience is required as franchise companies look to award licenses to entrepreneurial newcomers with transferable skills well matched to the running of the business. Training and support are provided by the franchisor, who is required by federal law to disclose the particulars of their opportunity to any prospective investor. Securing financing is often simpler. A growing number of franchisees are semi-absentee owners, allowing them to pursue other jobs or interests while still owning a business. These are a few of the reasons franchising enjoys the highest success rate of the opportunities discussed here.
Another way to look at a proven system is to understand there are guardrails. These can keep you from going off the cliff, but it also means there’s a rulebook. Territories are often restricted. Franchisees pay ongoing royalties and fees.
Often people choose franchising as a vehicle for starting fresh in a new industry. Many wish to build a legacy business that can grow in value over time to be passed on or sold to future generations.
Whichever entrepreneurial path you choose to explore, you will likely find the greatest hurdle is overcoming your fear of the unknown. Sara Blakely, founder of SPANX, suggests…
“Embrace what you don’t know, especially in the beginning, because what you don’t know can become your greatest asset. It ensures that you will absolutely be doing things different from everybody else.”
– Sara Blakely, founder SPANX
My hope is, now that you know more about the pros and cons of these business ownership opportunities, the prospect of starting your own business will become less about the fear and more about the faith you have in your own abilities.
Leslie Kuban is a nationally recognized franchise industry expert, CFE (Certified Franchise Executive) and Market President of FranNet; a locally owned and operated franchise consulting firm. Leslie and her team have helped more than 500 individuals achieve their dreams of business ownership through a no-cost, educational and coaching process.
Leslie is one of 15 industry contributors to the Amazon bestselling book on franchising, More Than Just French Fries.
Connect with Leslie to start a conversation today.