Blogtrepreneur: Millions of people dream of starting up their own business: of being their own boss, making it big, and having a company that that they can point to as their life’s work. But the realities of starting up a small business are sometimes overshadowed by myths which make it difficult to deal with the real challenges that arise in the first few years of operation. Here are some small business startup myths that might keep you from realizing your startup vision:
Myth: I’ll finally have time to do what I want / spend with my family / enjoy life
Reality: Anyone who has successfully started up a small business will laugh you out of the room if they hear your say this. The fact is, there are many benefits (personal and financial) to having your own business, but plenty of free time is not one of them. Granted, you do have a little more flexibility with your time. Many small business owners choose to work late at night so that they can spend time during the day with their families; but there’s still some major sacrifice…namely, sleep. Starting up a small business requires that you work 110%, without exception. Those fantasies of taking long vacations while your business grows itself? Just fantasies.
Myth: I’ll be profitable within the first year because I am hardworking / passionate / good at what I do.
Reality: It doesn’t matter how good you are at your business, how hard you work, or how much of your heart and soul you put into it. All businesses take time to get off the ground, and the majority of them are not profitable for at least the first couple years. You need to be realistic about this for a couple reasons. First of all, you can’t let yourself lose momentum or start to feel depressed just because you’re not profitable right away. Building up expectations like this can damage your business simply by virtue of chipping away at your morale. The other reason is that you’ll have to plan financially. Your budget needs to reflect five years of bootstrapping during your startup. With very few exceptions, no one hits the “big time” in six months, regardless of how talented they are.
Myth: I already know what I want to do, so I don’t need to write a business plan.
Reality: You do. A business plan is going to help you think ahead, plan for all contingencies, work with a budget, keep you focused on your mission, and help you sell your company to anyone else you need/want to have involved—lenders, employees, contractors, vendors, family, friends, etc. Writing a business plan doesn’t have to be rocket science. A simple, small business startup plan can be around 10-15 pages long and follow a simple outline. For an excellent resource on creating a business plan, I recommend the free ebook:
Outline for a Business Plan by Ernst & Young. http://www.techventures.org/resources/docs/Outline_for_a_Business_Plan.pdf
Myth: If I build it, they will come
Reality: You still need to market and advertise your business strategically. That means having a plan and a budget. It also means researching the most effective methods for marketing and advertising. There is no shortage of ways to waste money in advertising, and it can end up being a huge financial drain on a fledgling company. Do you really think 5000 key chains with your logo on them are a wise choice in your first year of business? Do you think the yellow pages are the best place to put an ad, when 80% of your business is done online? No matter how good you are, there is lots of competition and you small business has to establish a presence and reputation to go along with your talent.
Small business is one of the most exciting arenas for earning a living. There is unlimited creative potential and a chance to really make something tangible for yourself and your family. But doing so requires more than just a vision and some chutzpah. You need to be intelligent about how small business is framed in our marketplace, and what kinds of obstacles there are to overcome. You also need to be aware of the tools and support that you have at your disposal. Staying focused on these realities, and avoiding the myths that many fall prey to will only increase your chances of success and longevity in your small business.
Small Business Startup Myths [Blogtrepreneur]
Category: Entrepreneurship
Where other businesses struggle, franchise businesses thrive. Wendy’s and McDonald’s are prime examples of successful franchise businesses, and also provide inspiration for those individuals who really want to form their own successful businesses in the future. With a brand behind you and a good idea of what does and does not sell, it is no wonder that you have chosen to consider a franchise.
There are two types of franchises out there. One is the good franchise that takes care of its franchisees, providing training and support throughout. The second type does nothing but take from the franchisee and pushes for profit. There is a third type of franchise and that is the one that will rip off franchisees, taking them for as much money as possible. The latter two are not worth the time, money and energy, whereas the former is extremely desirable.
As such, it is essential that you do your research and investigate a franchise thoroughly before signing a contract or paying out any money. The list of questions below may help you to find the better ones as the answers they will yield will give you enough information to make an informed decision:
1. Have you and your attorney analyzed the franchise agreement in detail and do you both completely agree with the details?
2. Are there any elements or step required of you that would break the law or be to the detriment of yourself or your country?
3. Do the provisions in the franchise agreement give you exclusive territory for the period of your contract? If not, what is the maximum number of franchises that may open in your area?
4. Is this franchisor connected in any way with any other franchise company handling similar products or services?
5. If you answered yes to the above question, what is your protection against the second franchising company?
6. If you decide to end the franchising contract for any reason, what are the provisions for you to pull out of the contract and how much would you have to pay to break the agreement?
7. Are you able to sell your franchise during or at the end of your contract? If you are legally allowed to do so, what are the repercussions related to compensation?
8. What time period represents the duration of your contract and how long has the franchisor actually been in full operation?
9. Does the company offering you this franchise have a reputation for honesty and fair dealing among its franchisees?
10. Has the franchisor shown you any certified figures indicating exact net profits of one or more of its members, and have you personally checked the figures with these people?
11. Are you able to tap into franchisor assistance with training, PR, advertising, capital, credit or merchandising?
12. Are you offered assistance for finding the best location possible in your chosen area?
13. Does the franchising firm have solid financial input to ensure stability and the establishment of goals?
14. Does the franchisor have experienced management, trained in-depth?
15. Can the franchisor do anything above and beyond what you are capable of yourself?
16. Have investigations into your background been carried out and has the franchisor been assured that you are capable of making a profit?
17. Does the state in which you live in have franchising laws in place, and does the franchisor adhere to them completely?
18. How much equity capital will you need to purchase the franchise and operate it until your income equals your expenses?
It is extremely important to answer these questions fully and to your complete satisfaction. If this is the case then you may be extremely eager to become a franchisee. However, you should research all answers to get them verified in several places to ensure that your investment would be a wise one.
Purchasing a franchise can provide you with stability and profits in a short period of time but that is not to say that it is infallible. Less than 20% of all franchises fail so you need to ensure that you do not become a statistic. Information regarding specific franchising ideas can be found in the franchising directories, which are generally available at the local library. This will give you a little assistance to get started but you need to ensure that you are completely happy before committing.
About the Author:
GlobalBX provides a FREE business for sale exchange connecting business buyers, sellers and lenders. Search over 32,000 businesses for sale and franchise opportunities. Sell a business for free with no listing fees and zero commissions. We have all the top franchises as well as franchise resales. Find franchise reviews and get free franchise information. You can also contact over 300 lenders directly and get a business loan.
Franchising has a longer history than many people may imagine but there have been several defining moments during its history. One of the biggest events occurred on October 21, 1979 when the Federal Trade Commission (FTC) introduced the Franchise Rule. This was designed to protect franchisees because it asserted that all US operational franchisors were legally obliged to fully disclose details that all potential franchisees should know before committing to investment.
As such, it enforced FTC standards to ensure that all disclosures contained uniform information that has been prepared to meet the legal criteria. One of the main requirements of this law ensured that there has to be evidence to support any financial details given. This in turn assures all potential franchisees that there is profit to be made and make them fully aware of any pitfalls.
More specifically, the Franchise Rule requires the following information to be disclosed by all franchisors:
(a) The franchisor must declare its affiliates, directors, officers, management and individuals responsible for all areas of the business, such as training, support, and franchising information.
(b) The franchisor must declare whether it or any of its officers, management, and directors have ever been bankrupt or faced lawsuits in the past, even those from before the individual in question joined the business.
(c) The exact amount you are expected to pay in franchise fees and various other associated charges must be disclosed. This includes all immediate and ongoing payments after the franchise contract is signed and the business has opened.
(d) Any and all restrictions on the quality of goods and services that you, as a franchisee, may use. This includes any purchase restrictions that may be in place.
(e) Any help and support that will be offered by the franchisor and any affiliates including financial support.
(f) All restrictions applicable to the goods and services you will be managing and selling, as well as any restrictions that you have to work with when dealing with customers.
(g) Any advantage or guarantees provided regarding the location and locality of the franchise.
(h) The franchise conditions under which your franchise may be terminated, sold on to another franchisee, repurchased, or modified.
(i) Franchisee training programs that are available and any fees associated with them.
(j) The involvement, if any, of celebrities or known figures in the public eye within the business, whether in advertising or behind the scenes.
(k) Site selection assistance that is offered by the franchisor.
(l) The number of present franchises, franchises projected for the future, franchises terminated or not to be renewed, and the number repurchased in the past.
(m) Full financial statement disclosure.
(n) How far you are expected to participate within the franchise operation after becoming a franchisee.
(o) Full disclosure of proof for earnings and profit claims made regarding other franchisees.
(p) Full names and addresses of franchisees that you can talk to.
All of the above legal considerations of franchising must be fully disclosed during initial contact with the representative of the franchise, whether that is a broker or the franchisor him or herself. As soon as the franchise opportunity is discussed, the legal considerations must be fully disclosed. The disclosure must be at least ten days prior to payment or to any franchise or related contract being signed. This pertains to the contract signing itself and also any financial statements changing hands.
The Federal Trade Commission does not require franchisors to register, but depending on the state your franchise may be in, it may have to register on a local level. The Uniform Franchise Circular Offering (UFOC) guidelines have been adopted by most states as a result of their strict disclosure requirements. However, you should never take it for granted that the franchise is registered or offers full disclosure, thus providing you with protection of any kind. You must research the franchisor fully before committing.
About the Author:
GlobalBX provides a FREE business for sale exchange connecting business buyers, sellers and lenders. Search over 32,000 businesses for sale and franchises for sale. Sell your business for sale for free with no listing fees and zero commissions. We have 1000s of franchises as well as franchise resales. Find franchise reviews and get free franchise information. You can also contact over 300 lenders directly and get a business loan.
I can’t believe we didn’t learn them from the past recessions
1. Have a strategy ready to implement if your sales drop 10%. This is a normal business fluctuation. Too many businesses have grandiose plans for growth but don’t plan for this reality. Have a plan for what you would do if there is a 20% to 25% drop in sales. Almost all businesses will have a negative cash flow if they continue normal operations during this type of a sales decline. Either you will have a plan on how to significantly reduce costs or you will be borrowing money and putting your wealth at risk.
2. When times are good, pay down your debt, increase your lines of credit, and upgrade or replace your equipment. Pay as you go on these expenses. Put money away so you can live without a paycheck for 2 years. A downturn will eventually come and you will not have enough cash flow to pay yourself or pay off your loans. Your business will fail if you didn’t prepare.
3. When times are good, do everything you can to reduce your customer concentration. Even big customers will fail during a recession and if you concentrate your sales with them, you will follow them to failure. Also reduce your sales to any one industry. A single industry may be especially hard hit during a particular downturn.
4. When times are good and your customers are healthy, review any credit facilities that you offer your clients. When a downturn comes, accounts receivable will grow rapidly, increasing your risk of failure. Your customer’s customers’ problems quickly become your problems when they owe you money.
5. When times are good, work with your suppliers to reduce the amount of personal guarantees that you made. Check your lease to see if you are personally guaranteeing it. When you started out, you signed a guarantee of payment agreement that included you standing behind your business line of credit with your personal wealth to get delivery on credit. Now that you have been successful and times are good, they may allow you a limited credit line with only a corporate guarantee. In a recession, instead of “just” loosing losing your business, you may loose lose your family house without this change.
6. When times are good, align your employee benefits with the employee working hours or a fixed dollar amount you make available for the benefits. If you have to cut back on employee hours during a downturn, do the benefits costs also go down? If health insurance spikes up, is it your company’s obligation to pay more?
7. Developing your personal network is a big advantage during flush times. Networking loyalties develop customers that are not particularly price sensitive. Your networking clients justify using your business by believing they are getting superior service for this higher price. During a downturn, this all goes and most businesses switch to the low low-cost supplier. Be prepared to give these loyal clients your best price during bad times since they will most likely come back to you when things look better.
8. If the “sustainable competitive advantage” of your business is not being the low cost supplier of the basic product, you had better have a plan for getting there quickly. Customers will start doing without all of the bells and whistles on the products. Don’t tie your pricing structure to selling customers on high margin upgrades or more pricey models. They will start passing on these.
This article is provided by Stan Spector, author of “Baby Boomers’ Official Guide to Retirement Income”. Stan Spector is also a business broker in Rochester NY “Selling Family Businesses- Confidentially”
* * *
When looking at savings account interest rates, it’s important to not only pay attention to the rates but at how sound the bank account really is. This means doing a little research on the financial stability of the bank in question. The same holds true when you’re looking at a bank’s CD rates. You should also always try to stay under the FDIC insured limit.
For any individual looking to capitalize on franchising opportunities and owning a franchise business, there are several advantages to consider. Some of those you may be interested in are outlined below:
The Franchise Business Pros
· Having a brand behind you, whether it is locally or nationally famous, will save you a lot of time and money that would be needed to create your own brand or trademark. You will also attract customers immediately rather than having to advertise extensively.
· You will have an established business framework to work within, which dramatically reduces the risk associated with a startup business.
· You will already have tried and tested suppliers and services at your disposal, which will again save you the time and money associated with finding your own.
· You will receive ongoing support for sales and marketing throughout your franchise ownership. Franchisees often choose to tap into the help that is offered to them throughout their tenure via existing marketing and advertising assistance.
· Franchisees often get comprehensive financial assistance because banks are often more willing to lend money to well-known brands and names than business startups that are completely unknown to consumers. Franchisees may also have access to direct financial assistance from the franchisor.
· The risk of investing in a franchise is lower than it is for a regular business startup. An established concept is much more desirable because there is less risk.
· Continued development opportunities and research will be available. Franchisors tend to choose to tap into information concerning competition in the local area, seasonal goods, demand, and local attitudes.
· You will get business support from your franchisor, which will help to find you the best possible site and enable any construction work that needs to be done in addition to employee training and operational assistance.
· All business procedures and methods that you use will already be tried, tested, and proven to work.
· The quality and desirability of the franchisor products have been proven and come at a certain standard level that is well established.
· You will have the buying power of the franchisor and centralized purchasing at your fingertips, so costs may be reduced as a result of bulk buying savings that are handed down to the franchisee.
In addition to the pros of franchise businesses as outlined above, there are also others that you may want to consider. For example, expansion may come more easily with a franchise business and you may enhance your business interests with additional businesses, either within the franchise or outside of it. This is how dreams of riches become realities.
That is not to say that there are not cons and disadvantages associated with franchise businesses. A few of them are outlined below:
The Franchise Business Cons
· You may lose ultimate control of your business as a result of the established franchise standards that you have to run your business in accordance with. You may also find that you cannot implement your own ideas and initiatives.
· The level of royalties could be as much as 10% or more in select cases, which will of course affect your profits.
· You will have to pay an initial fee to buy into the franchise. It could be as little as $4,000 but may extend up to $50,000 so there is significant initial outlay.
· You will have to pay advertising fees to ensure that your business is recognized as existing in your current location. If the franchisor advertises poorly then your fees are wasted.
· You may have to buy a signage pack from your franchisor. Some franchisors insist on you buying their specific signage and so you may find it extremely expensive.
· If the franchisor gets into difficulties then so do you. As you effectively bear their name then you bear the brunt of a problem, including issues with suppliers.
In conclusion, although there are some disadvantages with having a franchise business, the positives far outweigh the negatives. The risks of failure are significantly reduced and so there are fewer problems than a brand new startup business. Of course, you should always ensure that the paperwork is in order, and you should complete your research and due diligence before committing because there are no guaranteed profits, and you would ultimately be responsible should the venture fail.
About the Author:
GlobalBX provides a FREE business for sale exchange connecting business buyers, sellers and lenders. Search over 32,000 businesses for sale and franchises for sale. Sell your business for sale for free with no listing fees and zero commissions. We have 1000s of franchises as well as franchise resales. Find franchise reviews and get free franchise information. You can also contact over 300 lenders directly and get a business loan.