Sunday, September 25, 2011

Buying a Franchise or Starting on my Own?

Buying a franchise is the safest way to start a business. If someone can afford it, going with a franchise will help protect your investment.

Franchising is where someone has taken a successful business or concept, perfected it and then duplicates it. In most cases buying into a franchise is the safest way to start a business. Quoting the book The E-Myth Revisited, “Over the course of one year, Business Format Franchises have reported a success rate of 95% in contrast to the 50-plus-percent failure rate of new independently owned businesses. Where 80% of all businesses fail in the first 5 years, 75% of all Business Format Franchises succeed!”

If you start your own business with $50,000 and fail, you lose $50,000. If you buy a franchise and invest $100,000 and succeed, it did cost you more to get started but not only did you not lose your 50k but now have a thriving business which is not only provided a good income, you are building equity for when it comes time to sell.

If the average success rate of a franchise company is 75%, then that means half of them are below 75% and are half better. Why not only look at those with a 90% or better chance of success? To do that you will need to do some research or get help from a qualified consulant.

There are many reasons to buy a franchise. First it is a proven concept. They give you a road map to being successful. Buying power, marketing help, accounting procedures set up, employee hiring practices are taught, salesmanship and other special practices are taught to the owners. Customers know if you are a franchise, you will be consistent, give good service and you will be around for years to come.

Is it cheaper to start your own business or to buy a franchise? Just ask the 80% of independents who have failed.

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