URL: http://www.entrepreneur.com/magazine/entrepreneursstartupsmagazine/2005/october/80124.html

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.

Success could also come from carving out a niche for your business to dominate. Starting a niche business means targeting your product or service to a select group of customers with a specific need. Perhaps it's a device that only seniors can use or a service aimed at helping homeowners detect mold in their homes. "It requires you to know what your specialty is," says Strickland. "You're targeting your resources [so] your message doesn't get distorted. You're not advertising on network TV when your customer is someone who only watches specialty TV; you're not trying to sell tennis shoes to people who only wear sandals."

Since you're not spreading your resources too thin, your niche business can gain maximum penetration in your market, notes Strickland. And if you're in a small enough niche, you won't be terribly price-sensitive, as you likely won't have much competition. The hard part of a niche business, though, is that it takes longer to get the word out about your company and build a dedicated customer base. And while focus is good, too small a niche can limit your customer base and, by extension, your company's profitability.

David Phillips struck just the right balance with his Mt. Pleasant, South Carolina, business, Custom Development Solutions. As owner of this consulting firm that specializes in planning and executing capital campaigns (such as fundraising plans) for nonprofit organizations, Phillips knows his market is a very specific one. With a background in the nonprofit industry, Phillips knew exactly what his target customers wanted, and he diligently pursued those clients upon his 1996 start. "I spent three or four hours a day on the telephone," recalls Phillips, 46. "I called former clients and colleagues of mine, finding leads and chasing those leads with phone calls." He built his niche business on his reputation and grew it via word-of-mouth recommendations from clients, a strategy that has his business projected to gross $2.5 million this year.

Hey! Go Get Your Own!
If you've got that maverick spirit, you may just want to build your very own business from your very own business idea. It's your light bulb, and you want to make it shine on your own. While building a business from your original idea will garner you more glory (because it'll be yours alone), it will also require more foundation-laying than other methods. You'll handle everything from payroll and answering phones to setting up distribution and securing vendors. And because this method is so open-ended, it can be difficult to focus. Says Clark, "Many people never get started because they're constantly trying to reinvent [the idea]."

But don't totally knock that freedom-it's a great benefit as well. "You don't have to fit somebody else's model," says Clark. "You can pick your product, your customers, your hours [and] your type of work." Though it's an original business, Clark also suggests looking at similar industry businesses for ideas on how to simplify processes and save time. If you're opening a specialty online retail store, check out other online stores and get background on the industry-how are other businesses set up? "Try to adapt those models to some extent so you're not reinventing everything," says Clark.

Take advice from Jason Friedman, founder of Creative Realities Inc., a Fairfield, New Jersey, company that designs technology-enabled marketing displays, including interactive kiosks, lighting, architecture, audio and video. Friedman, 33, started the company in 1997, when he saw a hole in the market. Formerly involved in theater, Friedman wanted to incorporate all the elements he'd seen in marketing displays, make them high-tech and use principles of architecture and design to target audiences with a fresher message.

Starting from scratch, he chose to contract with independent architects and designers-and when they would pitch their services to big clients, he would join them, and they would both land the gig. This strategy has garnered Friedman such clients as Bank of America, Gap, TiVO, Time Warner Cable and Xerox (just to name a few), pushing his company's 2004 sales to $12 million.

Everything Old is New
You see it being done somewhere, but you're sure you can do it better. It's that business concept that is already out in the marketplace. While you're not exactly copying someone else's idea, you will be using elements of a previously existing business to create your company. The strategy worked for Ryan Azevedo, 34, and Lisa Katz, 40, co-founders of Jiggerbug.com, an online rental site for books on tape or CD, or for immediate download. Taking a page out of the NetFlix manual on DVD rentals, these entrepreneurs took the rent-by-mail concept and modified it for the audiobook market.

Speaking from Jiggerbug.com's Los Angeles locale, Azevedo says he wanted to combine his love for audiobooks with the NetFlix rental philosophy to create the company in 2003. "It seemed like the easiest solution," says Azevedo, who charges $19.95 to $39.95 per month for the service, which includes a two-week free trial. "[NetFlix] had already gone out and started educating the customers." That concept familiarity, no doubt, has boosted Jiggerbug.com's sales, which are projected to reach about $2 million in 2005.

That's perhaps one of the best virtues of starting a business based on an idea already out there, says Strickland. It can also potentially extend the life cycle of a particular business. The downside is that you must stay away from patent or trademark trouble-don't forget that companies can sometimes have process patents, too. And since the concept is already out in the marketplace, there's no stopping another enterprising entrepreneur from borrowing from the same idea to create his or her business and give you more competition. "The 'better mousetrap' requires a sound business behind it," cautions Strickland. "Exciting products aren't enough."

Whichever business startup strategy you choose, remember that you're still going to have to build on solid business practices to be successful, says Strickland. "That's true whether you're a franchisee, whether you bought an existing business... whatever," she says. "How you execute and how you use the systems you have will determine [your] success."

You've read up on all the pros and cons of each of the five startup approaches. How can you tell which one fits you best? Lea Strickland of FOCUS Resources advises aspiring entrepreneurs to do some serious self-examination. "Something usually drives someone to make the decision. Either they've been outsourced a number of times, their company has been downsized... [or] it's just something they've always wanted to do," she says. When you've got a fire in your belly for entrepreneurship, an outside catalyst can tell you that it's time to start up-and then your passions will help you determine which type of business suits you.

If you need lots of guidance and blueprints, a franchise is probably for you. If you like things your own way, without any outside influence, start from your own idea. If you're really good at revamping an old concept into something new and cool, perhaps that's the way to business for you. And if you're on a shoestring budget, you probably won't have enough upfront capital to buy an existing business. "The thing you need to take into consideration is where you are personally at this point in time," says Strickland. "Part of that decision is [also] knowing what financial resources you have and how much you're going to have to commit to the business."

On to the Next Destination
Getting the word out about your new business is key to any successful enterprise-but different startup tactics require different marketing tactics. When you buy a business, for instance, you need to determine if it's a local, regional or national brand, says Robert Manasier, a marketing expert with InFocusBrands.com, a branding and marketing company in Stony Point, New York. The company's current brand profile will help you determine your marketing moves: Do you need to expand? Do you need to get better regional brand recognition before going national? Should you go national at all?

And even though franchise marketing plans are usually set out for you, Manasier suggests tailoring those big national ads to your own community and getting your own flavor into the ad templates the franchisor provides, as much as the franchise agreement allows.

In marketing for a niche, he says, "You need to understand your competitors and your market to make sure you position your [niche] company correctly-how you say [your message], what colors you use, who you're speaking to-so that you speak their language."

If you create a business from a completely new idea, you might be overwhelmed by marketing choices. Manasier suggests boiling everything down to one simple message that says it all about your company and reinforcing that in all your marketing materials.

No matter what startup method you choose, says Manasier, "Make sure everything you create for your marketing goes back to that [one] message."