Different approaches to starting your own business
? A good business idea
A good business idea could be:
- an invention,
- a new product or service, or
- an original idea or solution to an everyday problem.
It might also be:
? a gap in the market that you can fill
? a business related to the work you do already
? an interest or hobby that you can turn into a business
Whatever your idea is, you need to be sure that it fits with
your needs as an individual, as well as being a viable business
proposition.
Questions to ask yourself
? What is it that you will personally bring to the business in
terms of relevant experience and expertise?
? Is there a market - a need for the idea, and customers
who will pay for it?
? How big is the market, and how will you reach it?
? Who will be your main competitors?
? What is special about your idea, making it different from
similar products or services already out there?
? How will you fund your idea?
? What might go wrong?
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To turn your answers to these questions into key documents
for your business, you need to prepare a business plan and write a marketing plan.
Sources of help
? You can get free professional help from your local
enterprise agency.
? Discuss your ideas with friends and colleagues,
particularly those who know about the business.
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? A tried and tested business model
Some self-starters choose a well-trodden path - such as buying
an existing business or rights to a franchise - which can carry
fewer risks than going it alone.
Advantages
? It is usually easier to get finance.
? A market for the product or service will have already
been demonstrated.
? A business plan and marketing method will be in place.
? You should have valuable experience to draw on.
? Many of the problems will already have been discovered
and solved.
? A franchise comes with financial support too.
Disadvantages
? Some businesses that are up for sale may be experiencing
difficulties. Make sure you fully understand the reasons for
selling, as you may need to invest quite a bit more on top of
the purchase price to give it the best chance of success.
? The rights to a franchise or to sell particular products or
services may be expensive.
? With a franchise, there may be a particular way to run
the business that you have to stick with.
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? A specific business opportunity
Sometimes the possibility of owning your own business can
come as a complete surprise. Perhaps you are offered the
opportunity to buy out your employer, or take on a family
business.
Opportunities like these are like any other business start-ups.
You still need lots of personal commitment and you may need to
put your own money on the line. You also need to carefully
assess the business to make sure it is viable.
Advantages
? Development, planning and market testing should already
be in place.
? There may be established customers, a reliable income, a
reputation to capitalise and build on, and a network of useful
contacts.
? You probably already have expertise in the product or
service and a good understanding of the business you're
taking on.
Disadvantages
? You may be taking on someone else's problems when you
take on the business. Ask yourself if there are problems
with the business, and if so, can you solve them?
? If you are buying out your employer, you may lose support
services that you take for granted now. You won't just be
responsible for your core role, but for everything else as
well, such as accounting, staff management and payroll.
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More help
You can get free professional help from your local enterprise
agency
Talk to people already in the business about your plans and
ideas. What can they pass on from their own experiences?
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? A business with social aims
You may want to start a business that isn't just for profit but
also has a social purpose. For example, you might want to
provide a service for a disadvantaged group in your local
community, or help improve the local environment.
Although any business can have social objectives, you might
want to consider setting up a specific type of business known
as a social enterprise. Although a social enterprise is run as a
business, and often operates under the same financial and
profit-driven pressures, it also aims to provide a clear social
benefit. The profits are mostly reinvested, or used to support
its social aims, rather than being paid to the owners of the
business.
Advantages
? You earn a living doing something you feel is worthwhile.
? As your business grows and matures, your community or
beneficiary will also benefit.
? Customers may be more willing to buy from a business
that supports a good cause.
? It may be easier to attract and motivate employees (or
even volunteers) to work in a social enterprise.
? You may qualify for a grant, or be able to raise finance
from people or organisations sharing your social aims.
Disadvantages
? Making profits and achieving your social aims can
sometimes conflict with each other. You may have to make
difficult choices.
? Although you can earn a reasonable income working for a
social enterprise, you will not make your fortune - most of
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the surplus profits are put back into the business or go to
support its aims.
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Buy a franchise
Taking on a franchise is an option worth considering for anyone
who wants to run a business but doesn't have a specific
business idea or prefers the security provided by an
established concept.
The right franchise can give you a head start. Instead of
setting up a business from scratch, you use a proven business
idea. Typically, you trade under the brand name of the business
offering you the franchise, and they also give you help and
support.
Successful franchises have a much lower failure rate than
completely new businesses. But it isn't all plain sailing. Some
franchises are better than others. And some people find that
running a franchise just isn't for them.
? What is franchising?
The term franchising can describe some very different
business arrangements. It is important to understand exactly
what you're being offered.
? Business format franchise
This is the most common form of franchising. A true business
format franchise occurs when the owner of a business (the
franchisor) grants a license to another person or business (the
franchisee) to use their business idea - often in a specific
geographical area.
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The franchisee sells the franchisor's product or services,
trades under the franchisor's trade mark or trade name and
benefits from the franchisor's help and support.
In return, the franchisee usually pays an initial fee to the
franchisor and then a percentage royalty on sales.
The franchisee owns the outlet they run. But the franchisor
keeps control over how products are marketed and sold and
how their business idea is used.
Well-known businesses that offer franchises of this kind
include TIM, GOODYS, EVEREST,…..
? Other types of arrangement
Different types of sales relationships are also sometimes
referred to as franchises. For example:
? Distributorship and dealership - you sell the product
but don't usually trade under the franchise name. You have
more freedom over how you run the business.
? Agency - you sell goods or services on behalf of the
supplier.
? Licensee - you have a license giving you the right to make
and sell the licensor's product. There are usually no extra
restrictions on how you run your business.
? Multi-level marketing Some businesses offer franchises
that are really multi-level marketing. Self-employed
distributors sell goods on a manufacturer's behalf. You get
commission on any sales you make, and also on sales made by
other distributors you recruit. Be aware that some multi-
level marketing schemes may be dishonest or illegal.
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? Advantages and disadvantages of franchising
Buying a franchise can be a quick way to set up your own
business without starting from scratch. But there are also a
number of drawbacks.
Advantages
? Your business is based on a proven idea. You can check how successful other franchises are before committing
yourself.
? You can use a recognised brand name and trade marks.
You benefit from any advertising or promotion by the owner
of the franchise - the "franchisor".
? The franchisor gives you support - usually including training, help setting up the business, a manual telling you
how to run the business and ongoing advice.
? You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same
region.
? Financing the business may be easier. Banks are
sometimes more likely to lend money to buy a franchise with
a good reputation.
? Risk is reduced and is shared by the franchisor.
? If you have an existing customer base you will not have to invest time looking to set one up.
? Relationships with suppliers have already been established.
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