Are you thinking about starting a business? According to the U.S. Bureau of Labor and Statistics, approximately 68 million employees separated from their employer over the previous 12 months, ending in October 2021. Additionally, businesses have had to adapt their operations to combat ongoing labor shortages, supply chain interruptions, and product shipment delays. Combine these daily, on-the-job headaches with record low interest rates and you can see why many are considering an exit strategy to start their own businesses.
The most common paths to start a new business:
A.) Build an independent business from the ground up, or
B.) Invest in a franchise.
Franchising is projected to open more than 26,000 locations by the end of 2021, add nearly 800,000 new jobs, and contribute $477 billion to the U.S. GDP according to The International Franchise Association.
No matter what path you choose, business ownership is highly rewarding, hard work. While both paths have many similarities, there are some distinct differences. Understanding these differences can help you choose the best path for your situation and goals.
Let’s begin by looking at the independent business owner.
- Having your own business means you never pay a dime in royalties or franchise fees!
Let’s face it, more money in your pocket is always a positive. You decide on the business expenses and the budget. Assuming earnings are favorable, you choose whether to reinvest back into your company or take a draw.
- No one will tell you what to do. It’s all yours. You are in complete control of everything.
That means, your business plan, logo design and tagline, business location, operational procedures, training curriculum, bookkeeping, and customer service. In addition, you purchase and setup all technology for the business. You will secure a domain name, computer hardware, software, and cyber security. As an independent business owner, you also get to decide how to brand and market your business, your website hosting, design and customization, search engine optimization (SEO), registration of online business listings, lead generation strategy, customer retention management, social media design and content, and google analytics. You are only limited by your own imagination. That means you must think of EVERYTHING.
- You decide what vendors to work with for business services and supplies.
All businesses require basic equipment and services such as phones, vehicles, printers, software, marketing collateral and insurance. As an independent business owner, you will seek out and manage all necessary vendor accounts for equipment, services, and products. This also means constant sharpening of your negotiation skills to ensure you receive competitive rates for all the above.
- You must find industry groups and conferences to attend.
With any new business, some form of networking and continuing education is a must. As an independent owner, you will need to seek out local groups or affiliations to join so you can begin to build your brand and customer base. As with anything new, you get out of it what you put into it. Most of the networking groups are “referral driven”, meaning you scratch their backs, and they will scratch yours. In addition, you will need to locate annual industry-related conferences that are worthy of your investment and travel time. These meetings will allow you to stay connected to innovative ideas, shared challenges, and new resources for your business.
Now let’s look at the franchise business owner.
- You will pay a franchise fee.
You sign an agreement with the franchise company (the franchisor) and pay an initial one-time fee that covers a wide offering. This fee will secure a protected territory for your business to operate within, a license to use the company’s franchise trademark, operating systems and procedures, budgets, pre-vetted vendors, and opening support with real estate and state licensing if required. You are essentially in business for yourself, but not by yourself.
- You will pay royalties.
Once the business is generating sales, you are required to pay a royalty fee to the franchisor. Some franchise companies may require you to purchase inventory through them that you will sell in your business. The royalty is usually a flat rate or a percentage of weekly or monthly sales. In return, you receive business coaching support in marketing, HR, operations, sales, and accounting to name a few. You also receive local website hosting, email tech support, business operations manuals and procedures, ongoing training resources for owners and staff, and direct access to existing franchise owners for networking and mentorship for the life of your business.
- You will likely pay into a national marketing fund.
More often than not, franchise owners will contribute to a national marketing fund monthly. Common uses for the fund are national media and public relations campaigns, humanitarian or philanthropic partnerships, SEO and online lead generation services, digital marketing content and tools, customer call-center services, online business listings, and the development of national and regional accounts to drive new business to the franchise network.
- Regional and annual conferences are hosted for you.
Once a year, the franchisor will host an annual conference for their owners. The purpose of the meeting is to bring all franchisees and their staff together (in person) to learn from one another and have a little fun. The franchise company generally provides all meals, beverages, cocktails, and entertainment throughout the event. Educational sessions are at the top of the agenda, along with motivational speakers, industry news, and round table networking. Similarly, regional meetings are hosted in various geographical areas allowing nearby owners to pool advertising funds and strategies together to help build their businesses.
So which path is right for you?
Starting a business requires extreme attention to detail and may require more than a business license to operate. Start by determining if you have the necessary skills and experience to forge your own path from the ground up or, consider a franchise that comes with continuous resources, support, and access to established owners in the same business that could teach you some tricks of the trade. The choice is yours.
If you are considering business ownership and unsure where to start, I can help! Contact me at firstname.lastname@example.org or 770-462-0797 and let’s create a plan to help Define Your Journey.