Why Invest?
Why Invest in an Organized Business Opportunity?
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Because not every Business Opportunity is built for success. As with any business, some Business Opportunity investments will be hugely successful, some will be outright Failures, and there are those that will fall somewhere in the range of mediocracy. Whether or not a Business Opportunity Parent Company is rapidly growing is not an indication of whether you will be successful as one of their Owners. Whether or not a Business Opportunity is a new concept is not an indication of whether the business opportunity will be successful.
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Remember, every product or service that you have ever heard of, was a new concept at some point in history.
The best predictor of your success in a Business Opportunity is not how quickly the system is growing, but the concept behind the brand, the marketing of the brand, and the execution of the concept. Is this an idea that you can get behind and feel comfortable marketing. Can you see yourself being an ambassador for this brand. Do you feel as if the products and services of the Business Opportunity Brand are in your wheelhouse. With emerging Business Opportunities, prediction of success can be more complex. As the number of locations open for sufficient time to predict success may be limited, and the Parent Companies promise of having a “Proven System” possibly just a bit premature. While the underlying units they had to base the Business Opportunity on may have been successful, the Parent Company may be expanding into new territory where their brand is unknown and untested, and the Parent Company may still be learning the craft of being a Parent Company.
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The question you should be asking is if this Brand, and Concept are needed in the geographical region you are considering purchasing a Business Opportunity. Package or Cookie-Cutter Business Opportunities that have not taken care to design a system that can and will support Business Opportunity Owners are risky investments for both the Parent Company and the Business Opportunity Owners. It is extremely important that you get to know the Parent Company and that the Parent Company gets to know you.
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Your opportunity for success in a well-managed and well-designed Business Opportunity is extremely good, even if the Business Opportunity is relatively new. It is up to you, however, to pick through the opportunities carefully and select a Business Opportunity based not on your emotions, but on careful analysis of the opportunity.
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Focus a lot of your attention on the amount of support the Parent Company is willing to offer. You are going to be in the system for many years, and you want to be certain that your Parent Company’s management team focuses on all of the system’s resources to help promote your success. Let’s examine the important reasons for becoming a Business Partner. Becoming educated about Business Opportunities is an important step in the process. Please be sure to read this entire article, not just bits and pieces. The objective of this article is to generate questions as you navigate through the process of choosing the right Business Opportunity.
Business Opportunities requires that you explore all of the potential benefits with open eyes so that you can be certain that this is the right path for you and your family.
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YOU WILL BE WORKING FOR YOURSELF
Business Opportunity Owners operate under a license to use the company’s brand and do so under the companies Brand Standards. The Brand Standards have already been established and put in place.
You will have achieved the American Dream of owning your own business. You will be rewarded for your own direct effort and business accomplishments, and when your business is profitable, those profits are yours and not your employer’s. So long as you are profitable and remain in compliance with the terms of the Business Opportunity Agreement, no one is going to be able to fire you, and you may even choose to open additional locations with the permission of the Parent Company. You must also understand that if your business is not profitable, the losses are yours and your Parent Company will be sharing in your failure. A great Parent Company is going to have systems in place to help minimize your risk of failure. With a Business Opportunity, you have controls in place to help localize your business as you deem appropriate. You are part of a system, and each Business Owner in the system benefits from a consistent level of product and services. All of the Business Opportunity Owners in the system are relying on you to perform well to help support brand standards.
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It is important to understand that you don’t own the Parent Company’s Brand, you are leasing it for a set period. Some Parent Companies will provide you with an option to extend your Business Opportunity License. You will have the right to use the Parent Company’s intellectual property and their brand.
It is essential that you understand your rights and obligations as a Business Owner and understand what your investment includes and does not include. Some Parent Companies offer more support than others.
YOU ARE INVESTING IN A PROVEN SYSTEM
In a well-designed and managed Business Opportunity there will usually be a proven system to provide you with the experience of the Business Opportunity. This can give you the expertise you need to operate the business to the Parent Company’s brand standards. Great Parent Companies have a well-crafted initial and ongoing training system to provide you with that expertise. But not every Parent Company has a proven concept, system, or an experienced management team. It is important that the Parent Company can provide you with the training and support you would expect from a proven system.
One of the benefits of Business Opportunities and pre-sale disclosure is that you can determine in advance what you are getting before you make the investment. But you need to invest the time and resources in conducting your proper due diligence.
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The Business Opportunity Disclosure Document should provide you with all of the information about the Business Opportunity.
Remember, you are not investing in the emotion of becoming a Business Owner – you are investing in a Business Opportunity and want one that is able to support you, and meets the promise of having a proven system. Take the time to explore the brands you are interested in and determine how proven and successful their system really is.
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THE PARENT COMPANY HAS BRAND RECOGNITION
Some do. Some don’t. Parent Companies are licensing you their intellectual property, including their brand. When they have consumer recognition, it enables you to open your doors with customers immediately. Parent Companies have already invested a significant amount of money in marketing their brands to the retail customer. This can afford you the possibility of immediate foot traffic. This is one of the many benefits of purchasing a Business Opportunity.
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Being the first with a hot brand and product to any market can be an exceptional opportunity and one you should look for. Just have a rational understanding of what the Parent Company is really providing and what you will need to do differently than in their other markets where the brand and the products and services are better known.
How the Parent Company expands is also important to you. Many new or even mature Parent Companies allow fate to define their market expansion strategy. Some use Nationwide Brokers to market their Business Opportunities and between the telephone and the Brokers may not have a well-defined expansion plan.
When this occurs, critical mass in a single market is not sufficiently established into building significant brand recognition, and many Parent Companies don’t have the resources necessary to support Business Opportunity Owners in every corner of the country.
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An ideal opportunity to look for is a Parent Company that is disciplined and is building their market development strategy intelligently. This type of development creates brand awareness support, marketing, and a proper supply chain for products.
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It is often far better to be part of a strong Regional Parent Company than to join a Parent Company with the same number of units scattered all over the country.
THE PARENT COMPANY HAS MADE THE MISTAKES SO THAT YOU CAN AVOID THEM!
Every business makes mistakes when first starting out. They picked the wrong location, or needed to change the products, services, or pricing. They failed to understand the business cycles, spent too much or too little on their advertising budget, or ran out of products when they needed it the most. At other times, they had too many products on hand and underestimated the cash flow of the business. Ultimately, they underestimated the initial investment, overstaffed or understaffed. These are all real situations that Parent Companies incurred as they were building their business model.
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These Parent Companies made mistakes, survived and learned, and now they are offering you an opportunity to join their system. There are a thousand different mistakes that you can assume the Parent Company has survived so that you don’t have to make them as a Business Owner. This is more than likely one of the most priceless benefits of joining a well-structured Business Opportunity program that is managed by motivated, high energy Parent Company Executives.
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Most Parent Companies have made mistakes and survived, and most likely have found the right formula for helping Business Opportunity Owners to avoid the same mistakes. If the only thing you got from a Parent Company was helping you avoid those mistakes, that alone might be worth the cost of admission into the Business Opportunity.
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Parent Companies will also in most cases provide you with the knowledge of how much capital you will need to start your business. In most instances, Parent Companies will also help you to understand the additional capital you will need to survive the initial startup period if in fact this is a consideration. This is of immense value, as not having sufficient capital is likely the number one reason small businesses fail.
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PARENT COMPANYS THAT OFFER INITIAL AND ONGOING SUPPORT
Parent Companies routinely provide initial and ongoing training to Business Opportunity Owners.
Parent Companies generally have a team of experienced professionals to help you get your business started and support you during your term. In emerging Parent Companies your team may be the founder of the Business Opportunity alone.
That may be fine, since the emerging Parent Company will often be more focused on making sure you are successful because your success will allow their Business Opportunity to grow.
As with all other benefits, the initial and ongoing support is only as good as the professional employed by your Parent Company, the effort they put into supporting you, and the quality of the underlying Business Opportunity.
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In emerging Parent Companies, you need to understand what the real capabilities of the Parent Company are. You need them focused on you and not necessarily focused on the original location they used as a model for your business. Emerging Parent Companies need to transition from being operators of a location into being Parent Companies early in their Business Opportunity process.
It is important for you to also determine where the Parent Company is focused. If most of their staff is focused on recruiting new Business Opportunity Owners or taking the Business Opportunity into international markets, you should not be impressed by the Parent Company’s domestic or international growth. That is not directly helping you. You should be looking for the Parent Company to be focused on supporting you and your sustainability.
PARENT COMPANY MAY PROVIDE FINANCIAL ASSISTANCE
On rare occasions, you will find that some Business Opportunities will provide Financial Assistance, Reduced Start Up Costs, More Competitive Royalty Fees, and Start Up Equipment to induce Business Opportunity Owners to invest in their Business Opportunity.
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These Parent Companies are willing to allow their own return on investment to come from the continuing royalties from the Business Opportunity Owners. When these types of incentives are offered by the Parent Company, you can assume that these Parent Companies are truly invested in the future success of your Business Opportunity.
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Pay very close attention to the amount of capital that is required by the Parent Company to purchase and begin operations. In many instances, the actual cost is much higher than the advertised price.
Where these Business Opportunity programs are offered, you will generally find them front and center in a Parent Company’s Business Opportunity recruitment materials. You can determine what direct and indirect financing programs and other benefits are available from the Parent Company by reviewing Item 10 of the Parent Company’s Business Disclosure Document and their marketing materials.
THE EXIT VALUE OF YOUR BUSINESS MAY BE HIGHER
During the term of your Business Opportunity, and if the Parent Company has a Transfer Clause, that states that you are able to transfer your business to a new buyer, and for a new full term, or a reasonable portion of your existing and renewal terms, the exit value of your business will generally be higher than a seemingly identical independent business.
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This is of course assuming you are a Business Owner of a well-known, well-managed and well-regarded Business Opportunity. The added selling price of a solid Business opportunity over an identical independent business can be significant and your exit valuation will generally be higher.
Prior to your entering into the Business Opportunity Agreement, understand what transfer rights you have and whether the Parent Company will be retaining any right of first refusal. In most Business Opportunities the Parent Company will appropriately retain the right to evaluate who you want to transfer the business to, and that can include your children and heirs.
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The Parent Company selected you because of what they believed were your perceived capabilities, and they rightfully should be able to determine if the person you want to transfer the business to, including your children, meets their qualification standards.
RATE OF SUCCESS
Most Parent Companies will tell you, either directly or indirectly, that you will have a better chance at being successful if you invest in their Business Opportunity when compared to other Business Opportunities or an independent business you might start on your own.
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Defining success or failure in a Business Opportunity is not as easy as you might imagine. One of the definitions used to measure success is the absence of failure. In that definition, failure is generally defined as the Business Opportunity permanently closing its doors. Therefore, if the doors do not close because the business is transferred to the Parent Company or a New Business Owner, and the business location continues to operate under that definition, the business would not be measured as a failure.
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The problem with measuring success rates is the inability to determine the circumstance of why the transfer was made. If a Business Opportunity is transferred to a new owner because the Business Owner is retiring after running a very successful business, and sold that business at a sizeable profit, or if the Business Owner sold the business at a significant loss, both would be considered a transfer.
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Whether Business Opportunities are more or less successful than other methods of conducting business is irrelevant to you. If you are a Business Owner of a great Business Opportunity and you are the only Business Owner who ever failed in that Business Opportunity, then for you, that Business Opportunity was a failure.
Therefore, what is important to you is whether the Business Opportunity Owners in the system you choose to invest in are successful. These are the questions you should be asking:
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1. Did they break even in a reasonable period?
2. Were they profitable enough to service their business debt?
3. Was the Owner able to earn a living and support their family?
4. Did the business earn a reasonable rate of return?
5. Does the Parent Company offer Financing for your Business Opportunity?
6. Does the Parent Company offer Marketing Support
7. Does the Parent Company provide Social Media Management
8. Does the Parent Company provide Licensed Software
9. Does the Parent Company provide Initial Training
10. Does the Parent Company provide On-Going Training
11. Does the Parent Company provide Accounting Assistance
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These are the questions that should be most important to you. You need to evaluate every Business Opportunity that you are interested in and determine how successful that Business Opportunity is likely to be for you.