FACT► FromMichele Lind, Small Business Expert, at NPR (www.npr.org): 75% of small businesses go out of business within the first 5 years. #1 reason small businesses fail: Run out of money.
Why Are You Here?… Be Your Own Boss More Community Less Travel Involvement Build Equity Small Business Tax Benefits Leave a Legacy Financial Independence New Challenges Better Income Potential Build My Own Team Flexible Schedule/Life Career Stability Balance Add New Income Escape From Corporate Stream Politics 6
Entrepreneur Quiz► Simple questions.► Answer honestly, then sum the total at the end.
Who are you?► Describe your risk tolerance ► High Risk ► Medium ► Low► Describe your Strengths / Weaknesses (2 columns)► Financial Situation How much money are you willing to put into your business How long can you go with no income?► Sales vs Ops?► What is your exit strategy for your business?
Additionally …► What are you passionate about?► How much money are you wanting to make?► What does your ideal day look like?► Do you have the support of others in your immediate family?
Here’s the answer!“ I want a business where I can make a high 6-figure income, in my first year, putting little or no money down. I want the business to have very high margins with no direct competition. It must be something that is very proven and established, and of course not yet in my market. I want to be able to not work nights, weekends and I would rather not have to deal with many customers or employees. Oh, and put in on hold for me for 6 months while I make mind up.” 10
Know thyself … Where are you on the riskscale? ESQ 119-181 ESQ 0-118 ESQ 182-210 Ultra Conservative Ultra Entrepreneurial / Corporate / Independent 11
New Business Options► Unique Patent► Invention► New way to use an old product► Retail► Services► Manufacturing► Legal
Concepts can be …► Capitalizing on latest trends► Hot new concept► Proven concepts► Bad Ideas
Future Career Options INCOME LIFE- OPTION COST RISK EQUITY REWARD STYLE LOW –Employment LOW MED – MED – LOW LOW MED HIGH HIGH BUY MED – MED – LOW – LOW – Business ? HIGH HIGH MED HIGH Business LOW – Start Up ? HIGH ? HIGH ++ ? (From Scratch) HIGH++ Buy LOW – LOW – MED – MED – MED – MED – Franchise MED MED HIGH HIGH HIGH HIGH 14 14
If buying another business orchoosing a franchise … Owners should have some company-owned units for training and R&D Owners should be growing regionally toward market share, not “buck shooting” nationally Franchisor must treat franchisees as working partners Shoot for a >20+% return on investment…no guarantees “Clean” UFOC, low incidence of failures/terminations Don’t pick a “fad” business Choose something that you would consume or patronize Business should be unique with competitive advantages SOMETHING YOU CAN BE PASSIONATE ABOUT! 15
Small Business Ownership Trends…► Green► Consulting concepts (large talent pool)► Creatively-themed concepts (Retail-tainment)► Healthy fast foods with taste (61% adults overweight)► Health, Health, & Health-related (Baby Boomers)► Financial (factoring, equipment leasing)► Trash hauling / Moving concepts► Cyber-cafes► Privatization/Outsourcing of government businesses► Home-Based, low-overhead business concepts► Multiple-unit / Master Franchising opportunities► …and much more 16
Debunking The Myths about Franchising … Franchises are mostly about burgers, shakes & fries Franchises are just buying yourself a job Franchises should align to either ones industry background or favorite hobby to be the best fit Franchises are expensive Franchises don’t allow franchisee input Franchises are mostly 24/7 operations 17
What Does a typical franchise cost? Total Investment Percent $150K and under 52.5% $150K to $300K 32.7% $300K to $500K 9.2% Over $500K 5.6% Source: Franchise Times Magazine 2005
Most Common Frustrations in starting yourown business …1. Obtaining Earnings Claim Information2. Don’t want to be “Sold” – this is serious stuff3. Who can you trust?4. Really knowing where you are on the risk scale5. Working through all of the costs – really knowing where you stand6. Bothering with writing a business plan7. Working through the Loan Process8. Actually finding / negotiating a physical place to do business (if needed) 19
A few mistakes to watch out for …1. Not doing enough self analysis – what are your “unique” buyer values?2. Not digging in to really understand the financial impact, costs, exit strategy, etc.3. Not being suited to doing it all yourself, without administrative support. administrative4. Only looking at what are perceived to be the “hottest” concepts5. Trusting everything you read on the internet6. Forgetting that it is a mutual assessment (You / Franchisor)7. Too analytical or too intuitive (Analysis Paralysis)8. Not seeking the advice of those you trust in your decision making process making9. Going with the least expensive / cheapest royalty business10. Not realizing the time it really takes to be successful 20
Need For A Legal Expert► What is an UFOC?► What is negotiable in a contract?► What are non-compete clauses?► What is the basis of an earnings claim?► What are my rights to full disclosure?► What are my contractual obligations?► What are the Franchisor’s obligations?► How do I improve my odds for success? 21
Financial Expertise► How do I finance a Franchise?► Which type of business entity is most tax efficient?► How do I protect for financial liability?► What federal, state and local regulations effect my business financially?► What is the best way to track my financial transactions? 22
Funding Your Business… Bank Financing Credit Card Home Equity Financing SBA Family/Friends/ Automobile Relatives (OPM) Financing Investors Bank Lines of Credit Venture Capital Leasing Franchisor / 401K/ IRA monies Business Owner of Existing Business 23
Call To Action… Spend a few minutes, write down next steps Write down your challenges Write down your concerns Who’s going to be part of your team of advisors Start evaluating the suitability of the options Build your Success Team What’s holding you back? 25