What form of business ownership is best for you?

There are several forms of business ownership, each with its own advantages and disadvantages. Depending on your reasons for starting a business, your personal needs, personality, or concern about risk, you may choose to:

• Start a business from scratch
• Buy a business that is already established
• Buy a franchise
• Build a network sales business

Starting a business from scratch

ADVANTAGES
Starting your own business from scratch can be very fulfilling. You have the freedom to be creative and innovative; you make all your own decisions. This can be your dream come true.
DISADVANTAGES
There is a great deal of risk involved in starting a new business. Many new businesses do not succeed. You have to do everything yourself, from creating a business name to promotion, and you must make all your own decisions. The buck stops here!

Buying an established business

ADVANTAGES
When you buy an existing business, the infrastructure is in place, a client base is established, and there is already name recognition. Past records let you know what you are getting and make it easier to finance. This option can be less risky than starting a new business.
DISADVANTAGES
An existing business may be covering hidden problems (e.g., financial difficulties, bad reputation, etc.) Your business reputation is tied to that of the previous management and it may be difficult to establish a new identity. Occasionally, the previous owner may impact your business by starting a competitive operation.

Buying a franchise

ADVANTAGES
Buying a franchise is a way to reduce risk and receive support from a large network. You know what you're getting. The preliminary work has been done with an infrastructure well established, a product line in place, and the marketing strategy developed. The customer base may be set, sometimes with good name recognition. The franchisor usually provides management assistance and training and may offer financial support. The pooled resources of many franchisees allows strong promotional opportunities and group buying power.
DISADVANTAGES
A franchise offers less freedom than an independent business. There are lots of rules and procedures in place. The owner cannot change products and services. Initial franchise fees may be expensive. You need to take into consideration start-up and operational costs as well as ongoing royalty and other payments to the franchisor. The reputation of one franchisee is affected by that of others. Transfer of ownership may require approval of the franchisor.

Building a network sales business

ADVANTAGES
There is the potential for high earning with a low initial investment. A network sales business allows you the freedom to be your own boss and have a home-based business. There is the opportunity to interact often with other people.
DISADVANTAGES
This type of business may require extending the work week into evenings and weekends. You must stay motivated and actively involved. The product may be difficult to sell without the benefit of a storefront and there may be expenses involved with selling. It is necessary to follow guidelines established by the company. The reputation of one business is affected by others in the organization.

Other sites of interest:

• The Office of Women's Business Ownership
• Manufacturer's Information Net
• Convenience Store Resource Center
• How to Start Your Own Bed & Breakfast
  
  

This document was prepared by the San Joaquin Delta College Small Business Development Center. Send comments to: Gillian Murphy

Acknowledgements, disclaimers, etc.