Franchisee vs Own Business

When any entrepreneur considers business opportunities, first thought that might cross their mind is should it be their own business or purchasing a franchisee. There is lot of brainstorming required before you come to a conclusion. This is because of the factors being weighed between an own business and purchasing a Franchise. You have to take into account your Business Experience, level of risk you can take and last but not the least financial considerations. Below I attempted to give a few pros and cons of both types of businesses.

Own Business:

PROS:

• The very thought of having an own business is very exciting because of the autonomy it gives along with a complete freedom to implement your ideas and goals. You can work towards your vision and building a reputation of your own.

• Own businesses might not always require a huge capital to start with because it can be started small and can be grown gradually over a period of time.

• There might be a huge competition in your chosen area of business where your competitors are hungry trying to maximize their market share. You have to be hungrier than them to sustain. Doing so in a long run will give a satisfaction of running your business against all those odds.

• Financial Wealth, brand recognition and reputation in the society goes without saying for a successful own business owner.

CONS:

• Failure rate of own business is much higher when compared to buying a franchise.

• Having no Boss might not really be true because your clients and customers are your Boss and they can be many times worse than the worst boss you ever had.

• There might be no schedule for the business owner but he need not have a schedule when he is working 24/7/365. This might be the case atleast for the first few years until the business stabilizes and a brand is established.

• You have to take unpredictable income for few years or worst may be risk of losses in terms of paying back creditors and other financial partners.

Purchasing a Franchise:

PROS:

• First and foremost advantage of Franchise is the success rate. Success rate of Franchise is far better than having an own business.

• You have customers who know your product even before you would have started, hence if the sales are good you might start making profits in a short time.

• Financial institutions would be ready to provide loans in most cases as they prefer Businesses already in operation.

• You always have Franchise support also can seek help and advice from the franchise community. You have a brand recognition from day one of your business operation.

CONS:

• Biggest drawbacks of purchasing a franchise would be paying the initial setup fees and also ongoing royalty for the rights to use the franchised system.

• Less freedom in terms of operation. You would not have any option of implementing your ideas or thoughts. You would have limitations on everything like what products or services you sell, advertising content and even the store furnishings.

• You might have a locking period with the Franchiser irrespective of whether you are doing good business or not.

• Though Franchise reduces the risk considerably but does not eliminate it altogether. Business success largely depends upon the efforts and willpower of the franchiser, which in no means is guaranteed.

Having said all these inarguably franchise companies carry great potential for success with distinctive disadvantages. Own business can be way to go if you are person who enjoy challenges at all levels and ready to work smart and hard. If you manage to run your own business successfully for longer period then definitely it could be the best choice you would have made in the past.

Go through my previous posts on entrepreneurship for more related information.

Pass me your comments and suggestions or tweet me @harimindi.

Startup Mistakes

People who have read my previous blog about entrepreneurship, thanks for revisiting. :)

Here I will present my views on the most important aspects of a startup which needs, a detailed attention.

In life "Learning from Mistakes" goes without saying, which obviously is seen more commonly in Startup Businesses. But the best strategy would be to learn from others mistakes. This means where others have made mistakes and lost money we could learn from their mistakes and save that money. But ofcourse there are innumerable mistakes that can still be made, but the most common ones could be overcome.

Legal:

• Structure of Business i.e Sole Proprietorship, Partnership, Corporation etc.
• Defining a Partnership Agreement without a detailed explanation. Entry and exit strategy should be defined.
• Handshake Deals, i don't mean it literally but a deal that is made without a complete description about the services to be offered.

Financial:

• Underestimating Operating Cost. Even if we are very careful in calculating operating costs there would certainly be other miscellaneous expenses which might add upto 20% to 30%. This over a period of time will surely show up.
• Mispricing Products or Services. i am sure this is the most important part of the Startup for obvious reasons. We try be different and unique in the market by under-pricing our products or services. There could be a logic of volume of business to be captured at one go but this might go wrong most often. An extensive market research is required to understand the Demand and Supply gap in the market and set the pricing. "Price your Product or Service at a point that reflects its value".

Marketing:

• Taking Strategy from Competitors. We keep watching our competitors, what they are doing, like their product updates or services, Website changes, Marketing Techniques etc., We have to resist the temptation and use our competitors as a source of ideas. Every Company operates differently from each other hence one must collect all these idea, filter them through our own priorities and needs. What is good for others might not be necessarily good for us.
• Over-Emphasizing Brand. Most startups are very obsessed with brand i.e making a brand name for themselves. While this is not wrong for early startup, marketing strategies should be more aggressive than branding. Branding can be achieved through aggressive marketing of the product or services.

Hiring:

• Right mix of People. To save operating costs we might have chosen people with less experience or fresher's. We might have a backing that we are talented enough to manage these people as we might have done in the past. This might prove to be a very costly move as these less experienced people might not share our vision, thereby costing our time managing them.
• Hiring someone to do a bit of everything. The "Jack of all Trades" approach is good for the owner or the founder but not for other functions of business. Each function of business should have specific specialists who can give their best to the role. This in turn improves the overall efficiency of the startup.

As i had mentioned in the beginning, there are innumerable possibilities of mistakes that could happen. Entrepreneurship is the art of taking right decisions at the right time. Finding a balance between theory and reality, making marketing and sales a top priority, buffering funding requirements are a few of the many factors that take the startup a long way.

Thank you for reading through this and i wish my startup friends and people who are passionate about Entrepreneurship all good luck and success.

I am waiting listen to your valuable feedback. Leave a comment below or tweet me @harimindi

Startup Businesses...A Thought

This is pretty much how most of us would want to venture into the World of Business when Entrepreneurship bug bites us. I had always wondered why they call it a bug until i found the answer myself. Like any other bug bites this is also painful, in fact more painful if not handled properly. But when handled in an appropriate way, i am sure you are the next Bill Gates!!!

The very idea of having an own business comes from the existing employer where we would be working. It is quite human to think how much your work is fetching for your employer. Then starts all the Mathematics like time and effort spent by us on the project and employers monetary expenditure on our salaries, infrastructure cost (per person) and miscellaneous expenses incurred. After all this what is the approximate net profit for the employer. Having known the number now, 2nd phase starts in our minds i.e comparison of lifestyles over a period of time. Basically weighing pros and cons of having an own business and working for an employer. We would start the calculations from a month to over a period of time which weighs more on having an own business. There are few main factors favouring this which are:

>>Being a Boss to others instead of you reporting to another person.

>>Considering the amount of effort put in for an existing employer, if the same is invested in an own business would be far more profitable.

Now we would start concentrating less on our job and concentrate more on gathering business ideas, opportunities, finance options, legal implications etc. Slowly we start spending more time on internet searching for various business opportunities. Most of us think of earning money quickly, though there are many forums, blogs, articles on internet which speak about the scams and frauds with get-rich-quick schemes and ideas. After deciding on type of business, we start networking with people outside and on internet to learn more on how to acquire clients for your business and make it a profitable venture.

But according to me there are few very important things which most of the startup entrepreneurs would be missing and hence would end up winding up their businesses in less than an year.

I would be writing about them in more detail in my next blog. I really appreciate your interest all through this article. Your comments and feedbacks are very much appreciated.


Thank you for your time.