You've got the idea buzzing around your head. You know you want to start a business, but you're not sure how. Perhaps you've got your eye on a fast-growing franchise. Maybe you'd rather carve out a specific niche or come up with an entirely new idea and build a business that way. You may have your sights set on a local business for sale that you can buy and build into an empire. Or maybe there's a business idea already out there that you want to reinvent for yourself. Choosing your business path probably won't be easy, but we've assembled a quick-study list of expert pros and cons of each startup method, along with a quintet of inspirational entrepreneurs who've been there, to help you develop your startup strategy.
Feeling for a Franchise
If you've ever gotten your hands on Entrepreneur's Franchise 500®you know that there's a franchise to cover nearly every industry or business idea you can imagine. Someone has gone before, perfected the system and, for the price of a franchise fee, will show you how to do the same. The plus side of choosing franchising as your get-into-business track: "The sense of confidence it gives you. You're stepping into a system that has already created success," says Michael Clark, founder of Business and Beyond, a small-business management consulting firm in Greenbrae, California. The franchisor's established methods can include systems for things like bookkeeping, as well as built-in relationships with vendors. An established franchisor may even be able to help with financing.
Knowing the franchisor would back her gave Lydia Padilla of St. Louis the confidence to launch her TRC Staffing franchise in 2000. Padilla's staffing-industry background definitely helped her start the business, but the logistics of running a staffing company sometimes require large outlays of capital upfront (such as making payroll for 20 new hires at once), which the franchisor was able to help Padilla with in the beginning. "I didn't have to have that kind of capital or revolving credit [by myself]," says Padilla, 35. "I could jump in on Day One and start focusing on sales and relationships with my customers." And as a result, she saw sales of nearly $1 million in 2004.
In fact, because franchisors outline so much of the process for you, some people may erroneously assume starting a franchise is easy. "It's almost like [entrepreneurs] thinking they can't fail," says Clark. When you buy a franchise, you still have to bring solid business skills to the table and make the business your own. Also be prepared for the costs associated with franchising, as both initial and ongoing franchise fees can be steep. Says Clark, "You get all these systems, but you're paying for [them]. You're trading all those dollars for expertise and a name." For more information on researching a franchise, see "Get Franchise Fit".
Buy the Biz
A close cousin to buying a franchise is gathering your capital to buy an already-established business. In that case, you're buying the assets, clients, employees, distribution channels and so on of someone else's business. Perhaps, like Randee and Eric Wechsler of Boynton Beach, Florida, you've found a successful entrepreneur who's retiring and looking to sell his or her business. This entrepreneurial married couple purchased Atlas Party Rental in 1999 and inherited all the previous owner's loyal clientele and his good name in the community. Says Randee, "We were in the right place financially and emotionally, and we said, 'Let's make this move.'"
Though the company was successful, Randee, 38, and Eric, 40, both saw the potential for more. Instead of renting just basic party equipment like tables and chairs as their predecessor did, the Wechslers wanted to create a one-stop party-rental company where clients could get everything they needed-from tables and chairs to linens and china. And while they wanted to keep the company's good employees, they did want to give the logo and branding a bit of a makeover to let the world know there was new blood at the helm. The strategy helped the pair grow sales significantly, from $800,000 the year before they bought the company to $2.3 million in 2004.
Buying a business's good name is a definite advantage of this startup method-though experts caution entrepreneurs to do their due diligence before signing. "You inherit a [company] culture that pre-exists," says Lea Strickland, author of Out of the Cubicle and Into Business and founder, president and CEO of FOCUS Resources, a small-business consulting firm in Cary, North Carolina. "There are a lot of transition points that can make a smooth road or a bumpy road." Plan your transition, suggests Strickland. If you can, try to have the past owner work with you awhile before he or she hands over the keys. And reassure employees that you chose the business for a reason (such as because it was successful), so you're not going to fix what isn't broken, but you'll make necessary changes to rejuvenate your newly purchased company. This can almost guarantee success.