As a business broker, it is common to receive individuals in my office who are looking to acquire a business in Florida, either with the objective of opting for the US visa or simply as a profitable investment search. Sometimes I find that these people are undecided about whether they should start a new business from scratch, invest in a franchise, or purchase an operating business. Below I will briefly share those same reasonings for the benefit of my consistent readers.
Starting from scratch: Clean slate
Pros
- Creativity and control: Starting a business from scratch gives the entrepreneur the freedom to shape the business as it was conceived.
- Personal branding: The brand identity is entirely yours to create, allowing for a unique and personalized business image.
Cons - High risk: Establishing a new business entails uncertainties, with the most risky part being the validation of a viable business model.
- Uncertainty: A new business starts with no customers, brand recognition or revenue, making initial operations challenging.
Franchising: The Middle Point
Pros
- Established brand: Franchises offer the advantage of taking advantage of an already established and recognized brand.
- Operational support: Franchisees receive support in terms of operating systems, marketing and training from the franchisor.
Cons - Limited independence: Franchisees must adhere to the established franchise model, which limits freedom of customization.
- Initial Investment: Franchise opportunities often require significant upfront fees and ongoing royalties.
Buying a business going: Time is money.
Pros
- Momentum: Acquiring an existing business means inheriting established relationships with suppliers, customers and employees.
- Proven success: A business that has survived the test of time has likely found product-market fit and built sustainable operations.
Cons - Detailed audit: A detailed audit is essential to uncover potential problems that may not be immediately apparent.
- Access to financial resources: Buying a business involves financial barriers, such as a down payment and additional costs such as working capital and professional fees.
In conclusion, the decision between starting, franchising or purchasing an ongoing business requires a calm evaluation of your goals, skills and risk tolerance. The probability of success is greater, considering the challenges that new businesses face, as highlighted by the US Bureau of Labor Statistics when it publishes the dramatic statistic of 20% failures in companies during their first year of operation.
As a Florida business broker, I have seen success stories in every category, but the advantages of purchasing an established business, with its existing platform and proven success, often outweigh the challenges faced by startups or franchisees.
Ultimately, when it comes to making decisions, Theodore Roosevelt was clear: "At any moment of decision, the best thing is to do the right thing, then the wrong thing, and the worst thing is to do nothing."
________________________________________________________________________________________________________________________________________________________Author: Alfredo González (alfredo@negociosenflorida.com)
Illustration: Bing Images.