Ways of Setting Up a Small Business

There are three ways in which YOU can start your own business:

Starting from Scratch

Starting your own business from scratch is undoubtedly the riskiest way of starting a business. However, it can also be the most satisfying.

There is no mythical or secret formula to establishing a business that is guaranteed to succeed. You only need to compare the Stock Exchange list of the top 100 companies from 10 years ago to those of today to see that even the largest companies can fail.

To stand the greatest chance of survival it is essential that you undertake substantial research into the market and, more importantly, research the market on an ongoing basis to stay ahead of the competition. You must also start small. Many small business start-ups suffer from delusions of grandeur and spend money on totally unnecessary items.

Only start your own business in an area in which you have some expertise or knowledge. Remember, whatever sort of business you establish you are going to come up against competition. Unless your business expertise and knowledge is at least on a par with those competitors you will be starting at a disadvantage.

Buying a Franchised Business

As an alternative to starting your own business from scratch consider buying a franchise. A franchise is a business that has already been tested in the market and proven to be a success. Remember, however, that it is the concept itself that has been proven and that alone will not guarantee success for you.

Franchising is really an informal partnership. The franchisor will want to ensure that your business is launched successfully and that it remains profitable. Their income as well as yours will depend on your success. This creates a bond between the two parties in terms of a close dependence on each other. Buying a franchise will allow you to run your own business, but unlike a new start-up business you will have the ongoing help and assistance from the franchisor to make it a success.

Buying an Existing Business

You may consider that buying an established business might be the easiest and safest way of running your own business. This may not necessarily be the case. There are all sorts of pitfalls that you could encounter. The first will probably be actually reaching agreement on what the value of the business is and how much the purchase price should be.

You may also need to investigate thoroughly the reasons for the business being put up for sale. If it is making money and is profitable why should the existing owner wish to sell? Even if the reason is a good one, for example, the retirement of the existing owner, you will often find that their value of the business is overstated on a true commercial basis. Some businesses are also built around the reputation of the owner so you will need to consider what will happen when they leave. Will the existing customer base transfer their loyalty to you as the new owner or will they now go elsewhere?

Buying an existing business is fraught with danger so professional help is an absolute necessity before you make any commitment.