There are generally four ways to become a business owner:
- Start your own business;
- Take over a family-owned business;
- Buy a franchise; and
- Buy an existing operating business.
Each option has its own level of risk.
- Start your own business. As 65% of start-ups fail, this is a very risky way to become a business owner.
- 2. Take over a family-owned business. While this can be successful, all too often the transfer produces poor results. The most common problems result from the “child” not having the skill or passion that the business founder had.
In many cases, running and growing the business is not the “child’s” dream, but taking it over from the parent is the path of least resistance. In some cases the basic skills have not been developed and the business is of a size where these skills are required.
Sometimes selling the business is the better option for both parent and child. I highly recommend getting professional advice prior to making a decision about transferring a business from a parent to a child.
- Buy a franchise. The success rate of new franchise purchasers is around 80%. While the risk is not as great as starting your own business, the rewards may not be as great either. You may find that you need to own multiple franchise operations in order to make significant income. For example, a typical franchised hairdressing salon makes $25,000 to $50,000 per year. Although this may not seem appealing, many operators own multiple locations and owning 10 or 12 locations that each make $50,000 per year may in fact be quite attractive.
- Purchase an existing operating business with trained employees, existing client and supplier relationships, a proven concept and location, plus training and financing from the previous owner.
The success rate when purchasing such a business through qualified business brokers is quite high: after buying from us an existing business that has shown profit for three years, some 98% of our buyers have been successful. I have personally helped more than 400 prospective buyers to acquire a business that worked for them and their family.
If you were betting your life savings and the future well-being of your family, purchasing an existing business as qualified above is certainly the best approach—minimum risk and the potential for significant financial return.
As with a start-up, the purchase of an existing business may require significant effort and long hours over the first few years of ownership, but you do have a head start and very low risk.
For more on the advantages of buying an existing business, read Buy an existing business and advance to go!