Should You Start a Small Business or Buy a Franchise?

Learn the pros and cons of each and what questions to ask yourself to arrive at the best answer.
Inside of Franchise
Whether or not you should start your own business comes down to your knowledge of entrepreneurship and your expertise. (Photo: ak12m studio/Shutterstock)

You’ve decided it’s time to be your own boss and start that business. Now you need to determine if you should go it alone or purchase a franchise.

The answer will come to down to your expertise, your knowledge of the industry and what you really want to get out of the time, sweat and money you’re putting in.

Rich Trimber, business consultant and senior counsel at Corporate Practice Group in McLean, Virginia, offered this advice.

4 reasons to start your own business

1. You are already an expert in your business. If you already know your field well and have a business model in mind, a franchise may have nothing to offer you.

“If you are a professional service provider, go get some solo contracts and sell your services on your own. If you are a chef, find ways to start catering out of your home for a fee. Make sure you can sell for a profit. Make the mistakes all new business owners make — small ones that you learn from,” Trimber said.

He suggested seeking guidance to help make sure your business idea is viable before you embark. “You need independent and non-emotional analysis of the concept to make sure it is a good idea and that it will work.” Assemble a team that includes a business consultant or lawyer, a money expert such as a banker or CPA and a mentor from the field you are considering.

2. You want freedom to do it your way. Franchises come with prescribed practices for most of the business operations. If you have a unique or unusual product or service, you may want the freedom to do business as you see fit.

The answer to whether to start your own business versus buy a franchise “depends on why you want to have your own business. What are you selling? What is the passion driving the decision to have your own business?” said Trimber.

3. Your capital would be better spent on your idea than on a franchise. The biggest question to ask yourself is whether you really need to spend the capital on what a franchise offers – namely, business plans, marketing and branding.

Determine the costs of setting up your solo business, then compare them to the costs of a franchise. “Part of your analysis should be to determine if you can produce similar financial results on your own,” Trimber said.

“Write your own business plan and then run it past a business expert who can test it and poke holes in it.”

“Remember, the franchise is going to take 5 to 10 percent of your revenue. Can you generate that same revenue number and not pay that fee? Then it’s probably a good idea to explore solo more than franchise.”

4. You want to franchise your business idea yourself someday. If you think your business idea may be a good fit for future franchising, take the time to build it while you develop the tools necessary to franchise in the future. “It takes four or five years of good healthy operations with multiple locations to franchise,” Trimber noted.

Rich Trimber

“The main reason to buy a franchise is that they have a proven system you can tap into.” -Rich Trimber (Photo: Rich Trimber)

4 reasons to buy a franchise

1. To avoid making costly startup mistakes. The franchise has already made the rookie mistakes you might make and can save you the money and time errors could cause.

“The main reason to buy a franchise is that they have a proven system you can tap into,” Trimber said. You are buying their history of success.

2. You need help with operational know-how. A good franchise will hand you all the operational practices you need to conduct business, everything from supply management and hiring to sales and production standards.

“The advantage to a franchise is that they are actually providing you with a proven business model that is turn-key,” Trimber said. “The cost should be about $300,000 minimum to buy and start the franchise, but it makes sense because replicating all of that is difficult.”

3. You need the marketing and branding a franchise offers. A good franchise will have a central marketing plan that reaches a wide audience. Franchisees generally pool resources for regional or national advertising. This allows the franchise to reach customers in a way that a solo business could never afford.

“Before you buy into a franchise, make sure they have a real marketing program that is dynamic and changes with each season,” Trimber said.

4. You need the customer base a franchise can provide. A good franchise has a loyal customer base, putting you one step ahead at the get-go.

Trimber said franchises that offer something people need, like food, make the most sense.

“If the franchise has a proven track record and offers a turnkey solution that engenders a following, like a restaurant or coffee bar, it’s good to have the franchise because the branding and supply system are already in place,” Trimber said.

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