There are several ways aspiring entrepreneurs can become a business owners. These include starting a new business from scratch, buying an existing business or starting a franchise. Another popular entrepreneurial tactic is to participate in a business incubator.
Start a new business:
One of the most common ways to become an entrepreneur is to start a new business from scratch. This is because the entrepreneurs see a need for a product or service that has not been filled before and then see the idea become a reality. Jennifer and Brian Maxwell, both long distance runners, founded Power Bar Inc, to give athletes a snack bar that would provide quick energy and be easily digestible. Jennifer who studied nutrition and food science at the University of California hit on the idea after Brain told her of losing the London Marathon largely because of a case of stomach cramps. The advantages of starting a business are the ability to develop and design the business in the entrepreneur’s own way. The entrepreneurs are solely responsible for its success. A potential disadvantage is the long time it can take to get the business off the ground and make it profitable. The uphill battle is caused by the lack of established clientele and the many mistakes made by someone new to the business. Moreover, no matter how much planning is done, a start up is risky as there is no guarantee that the new idea will work.
Buy an Existing Business:
Because of the long start up time and the inevitable mistakes some entrepreneurs prefer to reduce risk by purchasing an existing business. This offers the advantage of a short time to get started and an existing track record. The entrepreneurs may get bargain price if the owner wishes to retire or has other family considerations. Moreover, a new business may overwhelm an entrepreneur with the amount of work to be done and procedures to be determined. An established business already has filing systems, a payroll tax system and other operating procedures. Potential disadvantages are the need to pay for goodwill that the owner believes exists and the possible existence of ill will towards the business. In addition, the company may have bad habits and procedures or outdated technology, which may be why the business is up for sale.
Buy a Franchise:
Franchising is perhaps the most rapidly growing path to entrepreneurship. The International Franchise Association reports that the country’s 320,000 franchise outlets account for about $1 trillion in annual sales. According to some estimates 1 out of every 12 businesses in the United states is franchised and a franchise opens every eight minutes of every business day. Franchising is an arrangement by which the owner of a product or service allows others to purchase the right to distribute the product or service with help from the owner. The franchise invests his or her money and owns the business but does not have to develop a new product create, a new company or test the market. Franchises exist for weight loss clinics, sitting services, sports, photography, bakeries, janitorial services, auto repair shops, real estate offices, and numerous other types of businesses, in addition to the traditional fast food outlets. Exhibit lists five of the trendiest new franchise concepts, according to The Wall Street Journal. The exhibit lists the type of business the number of franchisees as of late 2003, and the initial costs. Initial franchise fees can range from $ 1,000 to $200,000 and that doesn’t count the other start up costs the entrepreneur would have to cover.
Source: New Era Management