Choosing A Business Opportunity
If you are considering purchasing a business opportunity, firstmake sure it complies with all business opportunity statutes--whichvary from state to state--and is registered in states whereregistration is required. Next, find out if the businessopportunity you're interested in provides an offeringprospectus to buyers. If it is a business opportunity that fallsunder the FTC rule, then it is required to disclose specificinformation to you.
Keep in mind when choosing a business opportunity that if youbuy an opportunity with a sizable number of outlets and at leastthree years in business, you will pay more for this establishedconcept than you would for a newer one.
New offers should be studied for the parent company'shistory to evaluate its success and longevity in its particularfield of operation. The newer offers will not have developedsophistication and service requirements to the same degree as theolder firms, but their fees will increase as they become moreproficient in their services.
If you were to ask a business consultant how to evaluate the"right" business opportunity for you, you would probablyreceive these guidelines:
1. Make an honest evaluation of yourself and yourabilities. If you've been behind a desk for many years,will you be happy calling upon businesspeople and selling them anintangible 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 yoube happy introducing a new product or an unusual service that thepublic knows nothing about? Can you generate excitement for an itemnot nationally advertised?
3. You must have complete knowledge of the product or servicewith which you are involved. If the parent company gives youlittle or no training in technical or management know-how, be waryof the business opportunity. If the licenser-seller has organizedall the operating knowledge gained through years of experience inthe business into a standard operating manual, look with favor uponthis business opportunity.
4. Make a market evaluation of the product or service to beoffered. Is the time right to introduce it to the public? Isthere a need for this type of item, and what is its potential inrelation to competition?
5. What is the market like for this particular businessopportunity? When Medicare was introduced, the time was ripefor medical and dental assistant schools, doctors' collectionservices, etc. With federal subsidies available for low-incomefamilies, the time is excellent to go into day-care centers.Automation and labor-saving devices are creating computerized gasstations, automated mini-theaters, etc. Campgrounds are also a goodopportunity today.
6. Find out how many buyers have been in businesssuccessfully for a respectable period of time. A legitimatebusiness opportunity will even provide you with phone numbers ofother buyers over the past several years, so you can verify thatthey're generally satisfied with the opportunity and that theseller is capable of fulfilling his or her promises.
7. Check the training and experience required to run thebusiness 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 servicerequirements; and to the financial leverage requirements? Can youmake more in another type of business?
9. Do you have to work more hours to make the same as you donow? Can you invest the same amount in the business opportunityyet operate a larger operation and get a better return on yourinvestment?
10. Check with current operators to see how they are makingout. Are they happy with their businesses? What problems dothey have, if any, that are common to all units sold?
11. Determine the history of the offering company'soperation. Is it a new firm with little expertise andexperience? Is it an older firm whose regular products havesatisfied customers for years? Are the franchises all offshoots oftheir regular business?
12. Are the service personnel of the parent company newlyrecruited, or are they professionals in the business?
13. Is there financial strength and strong credit behind thebusiness opportunity? Can the licenser-seller give you anescrow agreement to deliver a building, equipment, leaseholdimprovements, inventory, etc., as the unit is made ready for youruse? Check out the bank references given by the licenser-seller;discuss the company's financial strength with the appropriatemanager(s).
14. Evaluate the policies and plans of the company withthe associations and business groups in which the parent company orseller is involved.
15. The Better Business Bureau will give you a report ifothers have lodged previous complaints.
16. Dun & Bradstreet will deliver a status report onthe firm through the service of their subscriber network.
17. An in-depth study of the subject firm through anattorney, accountant or business consultant may be your best coursealong with the other points mentioned above.
18. To complete your evaluation, visit the home office of thelicenser-seller at your earliest convenience. Talk to thepersonnel and the training director. Visit the original prototypeof the business being sold. Evaluate other outlets. Expose yourselfto the other outlets' products and services to determine thequality dispensed.