Here are ways to ease into owning your own business
- January 27, 2011
Starting a business can be scary. Small-business owners are investing a lot of time, money and work into creating their companies — and giving up a regular salary to do it. But there are many ways to ease into owning a business that can mitigate your risk. Consider some of the following options:
Work from home: If your type of business permits, you might be able to start your business out of your home. You’ll save money in many ways: you won’t have a commute, and you won’t need to lease space. Technology is making it easier than ever to work from home, but there are some considerations to make.
You still must adhere to local zoning regulations if you are allowed to conduct your business from home. Contact your local government to ensure the type of business you want to start is permitted from home.
Part time: If you aren’t willing to risk it all just quite yet, you can also try to start your business without quitting your current job. The downside is that you could end up working all the time — and neglecting one job over the other. But it will also mitigate your risk and test the marketplace. If business grows, you might be more comfortable making it your full-time job. You can also reverse this by spending most of your time on your startup business and finding a part-time job to supplement your income.
Start a franchise: Franchising can give potential business owners the best of both worlds — the ability to run their company without the trial and error inherent in building a business from the ground up.
Franchisees have the benefit of selling a well-known brand-name product. They have access to proven marketing strategies and business plans. Under agreements, franchisees pay for the right to market a product under the brand name of the franchisor. The franchisor provides training and advertising in exchange for fees.
Another major advantage is that starting a franchise requires much less capital than another business startup. Banks are also more likely to fund a franchise.
Franchises are not for everyone, however. Franchise agreements use restrictions that franchise owners may see as prohibitive. Ongoing royalties and advertising fees must be paid by the franchisee.
As with any business, if you are interested in purchasing a franchise, make sure you do your research. Potential franchisees should use business news sources and franchising websites to investigate franchisors. Determine the number of franchises the franchisor has, the success rate of franchises, the company’s financial health and earnings projections, and whether the business has any pending lawsuits against it.
After narrowing potential franchisors down, another great source is the Uniform Franchising Offering Circular (UFOC.) Under federal law, franchisors must provide potential franchisees with a copy of the UFOC before they can offer to sell a franchise. This document will include information on the franchisor, its staff, management experience with franchises, fees associated with the franchise, territory rights and other franchises in the business with contact information.
Always use the advice of an experienced franchise attorney to help evaluate a company’s potential as a franchise and to review the franchise agreement.
Franchise resources include:
- Franchise Gator (http://www.franchisegator.com)
- International Franchise Organization (http://www.franchise.org)
- The Franchise Registry (http://www.franchiseregistry.com), and
- FRANdata Corp. (http://www.frandata.com).
Small business incubator: Many small business owners thoroughly understand their industry but lack infrastructure knowledge and other management skills necessary to run a business. That’s where small-business incubators can help.
These incubators can provide a variety of business facilities, including office suites and manufacturing and warehousing space, with a shared reception area, conference and meeting space, and kitchen facilities.
But the critical element these incubators provide is information, according to Jim Flowers, director of VT KnowledgeWorks, a business incubator located in the Virginia Tech Corporate Research Center. “In general, what incubators are doing is giving people information about business, usually by telling stories and sharing experiences about things that have happened to other businesses,” says Flowers.
The other key service incubators offer is the chance to build relationships. “Incubator managers help young companies build relationships with other companies and potential vendors, suppliers, customers, or potential employees, or just with other people who might have information they need two years from now,” says Flowers.
Most incubators also offer virtual services that can benefit home businesses or those who wouldn’t physically locate in an incubator, such as a store or restaurant. Virtual services range from mentorship programs to technical services that allow at-home businesses to have a separate physical mailing address and advanced phone system.
For companies physically located in an incubator, tenants pay a leasing fee for the services and are expected to graduate to allow others to use the space. There are also many specialized incubators, such as one in the Virginia BioTechnology Research Park in Richmond, which provides laboratory space for young biotech companies. To find a small business incubator, visit the Virginia Business Incubation Association’s Web site, http://www.vbia.org.