When most people envision "starting a business," they picture coming up with a new concept or product and being in full control of their brand. It can be incredibly rewarding, and you'll always have the pride of knowing you did it all on your own. However, there's a lot working against you as a new founder.
"The reality is that half of all businesses fail in their first five years," said Tim Conn, co-founder and president of Image One Facility Solutions. "It can be tough in those formative years."
While entrepreneurship does afford you the freedom of being your own boss, it also takes a lot to continually work on building and growing your brand.
"Do you see anyone in business for themselves … who isn’t working all the time?" said Patrick Hanlon, CEO of PrimalBranding.co. "It takes absurd amounts of passion, adrenaline and coffee to work 18 hours a day."
Are you prepared to start a business from scratch?
According to Hanlon, launching a new enterprise requires ingenuity, passion, persistence and "enough confidence and thick skin to listen to people tell you how many colors of wrong they see in your big picture."
Hanlon added that you must be prepared to build a community from the ground up.
"The community you build around your product is more important than the product itself," he said.
From a practical standpoint, Kara Harvey, CEO and founder of Elder-Well Franchising System, says startup entrepreneurs need the following attributes:
- Flexibility to commit to long hours and choose the business before other obligations.
- Basic business skills and knowledge.
- Industry insights and knowledge about their chosen business.
- Adequate personal capital, as it is often difficult to secure startup funding.
Finally, you must be "laser-focused on the vision of how [you] think something should or could be," said Conn.
[Read: The Step-by-Step Startup Guide: How to Start a Business]
Buying an existing business or a franchise
If the idea of building a brand from scratch seems daunting, you may want to explore buying an established business. Whether you purchase an independent business or invest in a franchise system, you'll be able to take advantage of numerous existing resources that you wouldn't have access to if you were doing it alone.
"Buying an existing business offers a way to skip the pain points [and] learning curves … that a startup entrepreneur experiences," said Harvey. "[It] already has developed successful operational procedures, a customer base, vendor relationships and trained employees."
"[A] pre-existing business has a track record," added Conn. "It has brand recognition … and stability. In terms of franchises, there is an added layer of a bigger brand and ongoing support from your franchisor."
It's also generally a lot faster and easier to get your entrepreneurial dreams on track with an existing business.
"There is no ramp-up period or … [certain] startup costs inevitable with a new business," said Matthew Wolf, head of advisory at Joorney. "Depending on how well the business has been run, it is a turnkey investment, one that allows you to build off of something that’s already running."
While entrepreneurship does afford you the freedom of being your own boss, it also takes a lot to work on building your brand.
Challenges to prepare for when buying an existing business
Buying a business can alleviate a lot of the stress and uncertainty of a new startup, but this path comes with its own difficulties.
"Getting around legacy systems, accounting, personnel and methods can be just as challenging, frustrating or danger-filled as launching from Day Zero," Hanlon explained.
Wolf also cautioned prospective business buyers about potential transition period challenges: Will existing customers know or trust you as the new owner? Has the previous owner prepared you to take over with a solid plan? Are you prepared to deal with existing employees who are uncertain about the new leadership and changes?
"You need to make sure it is a good fit for you," Wolf said. "Otherwise, trouble may be ahead."
Key considerations when buying a business or franchise
According to Wolf, buying a business is typically best for entrepreneurs who have a substantial amount of capital to invest and a clear vision for their own long-term business goals.
"Do you want to maintain current level or accelerate growth?" Wolf said. "What is the business’s long-term track record of success, and what is the relationship like with customers or clients?"
You'll also need to be comfortable with less creative freedom over branding, messaging and operations when you purchase an existing business, especially if it's a franchise.
"People who buy franchises are typically … willing and able to follow a system well," said Conn. "There are certain rules and standards you need to follow. If someone … does not want to follow those types of rules or [wants to] create their own system, franchising is going to be a tough fit."
[Read: Thinking of Buying a Franchise? Here are the Pros and Cons]
Harvey recommends asking yourself the following questions when considering a business purchase:
- Are you passionate about the business?
- Are all the financials and records available to you?
- For what reasons are the previous owners selling?
- Is the market and location right for the type of business?
"Going into a business with eyes wide open is key," Harvey told CO—. "You want to troubleshoot all potential causes for concern before you jump in."
Ultimately, said Harvey, running a business is all-consuming and full of challenging decisions, distractions and setbacks. Whichever path you choose, it's important to have a strong support system in place.
"Seek out strategic partners – people who can mentor you … and have an embedded interest in helping your business succeed," said Hanlon.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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