From Scratch, Franchise Licensing, or Purchasing an Existing Business
Should you start a business from scratch, buy the license to a franchise, or purchase an existing business? The answer is that it depends, What kind of business do you want to start? How much control do you want to have over marketing and other aspects of your business, and how much risk are you willing to endure? The answer to these questions will help you determine what path is right for you.
What kind of Business Do You Want to Start?
This is the very first question you should be asking yourself. Most of the time, you should start a business in a field where you have some knowledge and experience, and is also something you enjoy. Let’s use the HVAC industry as an example.
Buying an Existing HVAC Business
An existing HVAC business already had a marketing plan in place, a customer base, and a reputation, all things that take time to build. The business will also come with equipment like tools and trucks, and many employees will likely stay through the transition to a new owner.
On the con side, equipment might be outdated, and need to be replaced, employees and customers may be loyal to the owner more than the business name, and transitioning can be tough unless you work with the owner for a while.
Purchasing an HVAC Franchise License
A franchise license for an HVAC business enables to you have franchisee support, including national marketing, a reputation, and often protection from competition at least within the same company. Equipment can sometimes be purchased at a discount from the franchisee, and they often help you with financing.
The cons are that you are limited by a contract as to what marketing you can do, how far geographically you can spread your business, and you’ll have to adopt the franchisee’s company culture at least to an extent.
Starting an HVAC Business from Scratch
Starting from scratch lets you build your own reputation, your own customer base, and gives you freedoms that don’t come from buying an existing HVAC business or a franchise license.
However, the con is that you are also responsible for all of those things, and building your reputation and customer base will take time, which means you need more capital at the outset to get started.
How Much Control Do You Want?
The more control you take of your business development, marketing, and other aspects of your business, the more you are responsible for the outcomes. In this scenario, let’s use the example of a pest control business.
Buying an Existing Pest Control Business
As with the HVAC business mentioned above, an existing pest control business probably already has a marketing plan in place, a logo, and a reputation along with a customer base. You have some control when you take over as to the direction the company goals, but changes must be done incrementally to avoid upsetting customers and employees.
Purchasing a Pest Control Franchise License
In this case, the pest control franchisee has a lot of control when it comes to what you can do with your business, and if you finance through them as well, they essentially control a part of your financial picture as well. Owning a franchise gives you some control, but the company sets policies and guidelines you must follow to operate under their brand.
Starting a Pest Control Business from Scratch
As with an HVAC business, if you start your own pest control business from scratch, you have control over every aspect, from the equipment to marketing to the business development and plans for growth. This comes, however, with the most risk, which is what we will talk about next.
How Much Risk Are You Willing to Endure?
The biggest difference between the options for going into business for yourself is the risk. The breakdown is actually pretty simple no matter what kind of business you are talking about. Let’s use a home remodeling business as our example here.
Buying an Existing Home Remodeling Business
The risk of buying an existing home remodeling business or any other existing business depends largely on you doing your due diligence at the time of purchase. The more solid footing the business you purchase is on, and the way you handle the transition of ownership will determine your level of risk, but in theory, it is lower than that of starting your own business or even buying a franchise license.
Purchasing a Home Remodeling Franchise License
While there is never a guarantee of success when purchasing any business, because of the backing usually offered by the home remodeling franchisee, the risk is lower than starting a business on your own. A national reputation is one part of that, but so is the proven marketing and business plans you will be provided with. An established model for you to follow minimizes your risk somewhat, but you will still have to build your own customer base and there is some risk of failure that is out of your hands, such as location, competition, and even market trends.
Starting a Home Remodeling Business from Scratch
Starting from scratch on your own has the largest risk of the three methods for starting a home remodeling business. You have the most control, as mentioned above, but with that comes the most responsibility. The business model you use, the marketing, and the reputation you build all rest on your shoulders, and it is critical to get many things right the first time to minimize loss.
For some, the thrill of entrepreneurship means that starting their own business from scratch is the only way to go. For others, the risk is too high, and purchasing a franchise license offers at least some security. In many cases, buying an existing business is the safest way to transition into business ownership.
No matter what your desire for risk, control, and regardless of the type of business you want to start, if you are interested in a franchise or purchasing an existing business, one of the first people you need to talk to is a business broker. They often have an inventory of franchises and can connect you with local business owners who are ready to sell. Looking to buy a business or a franchise in the Sacramento, California area? Contact us here at Rogerson Business Services today, and let us help you achieve your dreams of owning your own business.