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When you're ready to invest in a small business, you'll have a lot of choices to make. Many questions might pop up in your mind:
• Do I want to start a small business from scratch by myself?
• Do I want a partner?
• Does a small business franchise sound like a less risky means of starting a small business?
You'll also need to investigate the requirements of your local town and state. You'll probably need a business license and (depending on the name of your business). You might even need to find a fictitious business name statement.
If you've never owned a business before, make sure you have some competent advisors (such as an attorney and an accountant) that you can utilize to help analyze any business in which you invest.
Generally, the cost of the franchise itself is related to the projected profit of the small franchise business. The front-end franchise fee (what you pay up front) will be a lump sum. On top of that, you'll likely pay a royalty fee (typically ranging from 3% to 8%) plus an advertising fee. If the small franchise business needs a store-front, you'll have lease fees or building or land purchase fees. Depending upon your business, you might also need to budget for equipment rental or purchase, signs, opening inventory, and working capital to pay the ongoing salaries and expenses until you generate a profit. Know your costs and what you need in terms of financing.
Some franchise operations offer turnkey packages, giving you almost everything you need to get going with your new small business opportunity. This can be a great help when you are starting out, but it can also be a great rip-off. Figure out exactly what they are supplying and how much that's worth to you. It's fair that you pay something for the ability to jump right into the small business opportunity, but you don't want to spend all your profits before you even get started. Talk to other franchise owners and find out their opinion about the turnkey package for starting a small business.
In addition to researching the particular small business franchise you are interested in, you should research general trends about the industry as well. No franchisor is going to tell you that you're buying in at the tail end of the business cycle. Think about what competition might appear or how your business might change with new technology. Is your service something that could be offered over the web? Will it eventually become obsolete? Look at the competition in your industry and find out whether they're introducing related new products or pulling back and heading in some other direction. Is there specialized knowledge required to run this small business franchise? Is your business plan dependent on cheap labor being readily available and what do the labor supply trends look like? Whatever your success is dependent upon, ask yourself what you'll do if it is not available.
Regulations and rules about starting a small business vary in different towns and states. You'll probably need to get a business license from your town (charges for this vary in different locations). Call your local planning office and find out the requirements in your area. Depending upon the name of your business, you may also need to file a “fictitious business name" statement. If you are going to open a bank account in your business name, you'll need to show the bank your "DBA" statement and your business license.
|Sheri Ann Richerson|