You’ve decided that you’re going to take the plunge and open your own business.
You’ve thought about it for a long time. You’ve got excellent credit at your bank for any needed loan, and you’ve got the ambition to be your own boss.
Now you have to decide what kind of business you should open, and whether or not you should launch a brand-new business, or invest in a business that has already been founded, is doing well, and is offering franchises to highly motivated people.
Your main goal is to start a business that will be profitable and enable you to be your own boss for a long, long time.
So, let’s explore the benefits of opening a brand-new small business versus opening a franchise.
When looking at whether or not to open up a new business or start a franchise, the first thing most people look at is the statistics.
How many small businesses fail after one year? How many after five?
And once they find that daunting number, they then look at the number of franchises that succeed after one year…or after five.
And depending on the thoroughness of their research, they may find that statistics say that 90% of franchises succeed.
Well, that’s not actually the case, either.
What both sets of statistics fail to take into account is the business sector(s) in which most small businesses and franchises fail and the business sector(s) in which most of them succeed.
So, let’s forget about statistics and talk about common sense.
Let’s talk about what makes a franchise more attractive than a start-from-the-ground-up small business.
Differences Between a Small Business and a Franchise
If someone wants to launch a small business, they have to start from the ground and work their way up.
First, they need to get their own financing, which may be difficult, with plenty of red tape to navigate.
Then, they need to learn how to run their business from a business standpoint. Many entrepreneurs have a great idea for a product or service, but they don’t have the knowledge to manufacture and then deliver that product or service in the most cost- and time-effective manner.
They don’t know anything about bookkeeping, accounting, or taxation.
Someone looking to become a franchisee, on the other hand, has a wealth of information at their disposal from the franchisor. It’s in the franchisor’s best interest that its franchisees succeed so that they will provide all necessary information on both running a business in general and running their business in particular.
Franchisors will also often have their own in-house financing program to help people purchase a franchise.
Franchisors, in other words, have already done the heavy lifting. Potential franchisees will benefit from what has already been done before allowing them to utilize the “best practices” of their successful colleagues in that business.
A Turnkey Franchise in a Low-Risk Sector
Not all franchisees succeed, any more than all small businesses succeed.
But a franchise has a substantially better chance of success if it is in a low-risk business sector, such as tax preparation. As we reported in a previous post, tax preparation is one of the most profitable business sectors today, with business owners making on average an 18% profit – as opposed to a 5% profit for restauranteurs.
Of course, some of that profit goes to pay various fees to the franchisor – but the franchisor in return provides advertising and expertise that an independent business owner has to pay for out of their own pocket.
Sense and Cents
When looking to launch a new business or become part of an established franchise, the benefits of franchise ownership are clear.
〈 The heavy lifting has already been done.
〈 A wealth of experience is at the owner’s disposal.
〈 The brand name of the franchisor is already known – a trust and authority factor have already been established.
And when looking at business sectors in which to purchase such a franchise, that of tax preparation is the logical choice.
〈 People will always need their taxes done
〈 People will always need financial services
〈 People will reward a company that mirrors their own values
Connect with G.I. Tax Service Online: