If you are considering purchasing a business opportunity, first make sure it complies with all business opportunity statutes--which vary from state to state--and is registered in states where registration is required. Next, find out if the business opportunity you're interested in provides an offering prospectus to buyers. If it is a business opportunity that falls under the FTC rule, then it is required to disclose specific information to you.
Keep in mind when choosing a business opportunity that if you buy an opportunity with a sizable number of outlets and at least three years in business, you will pay more for this established concept than you would for a newer one.
New offers should be studied for the parent company's history to evaluate its success and longevity in its particular field of operation. The newer offers will not have developed sophistication and service requirements to the same degree as the older firms, but their fees will increase as they become more proficient in their services.
If you were to ask a business consultant how to evaluate the "right" business opportunity for you, you would probably receive these guidelines:
1. Make an honest evaluation of yourself and your abilities. If you've been behind a desk for many years, will you be happy calling upon businesspeople and selling them an intangible service? If you've been a field salesman for years, will you be satisfied selling snack foods behind a counter?
2. You must run your business enthusiastically. Will you be happy introducing a new product or an unusual service that the public knows nothing about? Can you generate excitement for an item not nationally advertised?
3. You must have complete knowledge of the product or service with which you are involved. If the parent company gives you little or no training in technical or management know-how, be wary of the business opportunity. If the licenser-seller has organized all the operating knowledge gained through years of experience in the business into a standard operating manual, look with favor upon this business opportunity.
4. Make a market evaluation of the product or service to be offered. Is the time right to introduce it to the public? Is there a need for this type of item, and what is its potential in relation to competition?
5. What is the market like for this particular business opportunity? When Medicare was introduced, the time was ripe for medical and dental assistant schools, doctors' collection services, etc. With federal subsidies available for low-income families, the time is excellent to go into day-care centers. Automation and labor-saving devices are creating computerized gas stations, automated mini-theaters, etc. Campgrounds are also a good opportunity today.
6. Find out how many buyers have been in business successfully for a respectable period of time. A legitimate business opportunity will even provide you with phone numbers of other buyers over the past several years, so you can verify that they're generally satisfied with the opportunity and that the seller is capable of fulfilling his or her promises.
7. Check the training and experience required to run the business properly. Is there a suitable curriculum of training? What is the scope of training? Does it demand mathematical skills? Does your background fit its requirements?
8. What is its profit ratio to sales; to time and service requirements; and to the financial leverage requirements? Can you make more in another type of business?
9. Do you have to work more hours to make the same as you do now? Can you invest the same amount in the business opportunity yet operate a larger operation and get a better return on your investment?
10. Check with current operators to see how they are making out. Are they happy with their businesses? What problems do they have, if any, that are common to all units sold?
11. Determine the history of the offering company's operation. Is it a new firm with little expertise and experience? Is it an older firm whose regular products have satisfied customers for years? Are the franchises all offshoots of their regular business?
12. Are the service personnel of the parent company newly recruited, or are they professionals in the business?
13. Is there financial strength and strong credit behind the business opportunity? Can the licenser-seller give you an escrow agreement to deliver a building, equipment, leasehold improvements, inventory, etc., as the unit is made ready for your use? Check out the bank references given by the licenser-seller; discuss the company's financial strength with the appropriate manager(s).
14. Evaluate the policies and plans of the company with the associations and business groups in which the parent company or seller is involved.
15. The Better Business Bureau will give you a report if others have lodged previous complaints.
16. Dun & Bradstreet will deliver a status report on the firm through the service of their subscriber network.
17. An in-depth study of the subject firm through an attorney, accountant or business consultant may be your best course along with the other points mentioned above.
18. To complete your evaluation, visit the home office of the licenser-seller at your earliest convenience. Talk to the personnel and the training director. Visit the original prototype of the business being sold. Evaluate other outlets. Expose yourself to the other outlets' products and services to determine the quality dispensed.