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Different approaches to starting your own business

By Michael Rodriguez,2014-07-09 11:13
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Different approaches to starting your own business ...

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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