About Business Ownership, Be The Master of your Own Destiny
**Author: Steve Ivey** Edited by V Simon
So you want to be a Florida business owner, master of your own destiny?
Which came first – The Chicken or the Egg–
The age old question in the title might be worth thinking about. Should you do a start-up with an egg or should you buy some chickens? A silly analogy? Maybe not.
Many people dream of starting a venture and becoming a business owner in Florida. I’ve helped several hundred wannabe-entrepreneurs work through this process. Many come in with the egg in hand, delicate, carefully guarded and full of promise. Perhaps they’ve decorated the egg to make it look more attractive and more advanced than other eggs. Convinced that their egg is unique yet they really aren’t quite sure what it will be when it hatches. They rarely consider that it may not hatch at all. After a time of incubation where you’ve kept it warm and looked at it all hours of the night maybe even added a few more colors to it, it hatches.
You have a chick! They are furry, loud and ready to be fed. It was a chicken after all and you are very proud of this new creature, you probably give it a name even though you can’t tell whether it’s male or female (which is very difficult in young chicks). A few days later you realize that you’ll need another egg or have to buy another chicken to mate with yours or your precious egg, after lots of feed and care, will have provided you with 1-chicken dinner and be gone. Your great idea didn’t produce much and you really were never in business.
Of course, you are smarter than that so you had several eggs or a partner who also had an egg that was compatible with your egg, Hmm, more about that another time. The point or question is: did you save time or resources by starting with the egg versus buying some chickens? Both actions will get you to the same place of beocming a business owner in Florida. You thought the egg route would be simpler and cheaper, let’s explore that.
Business ownership: A Going Concern or Start from Scratch
Previously we were discussing, not whether to go into business, but the decision of which method made sense for you. A chicken or egg scenario, do you start from scratch with just an egg? An idea that has yet to hatch but holds great promise or do you purchase some chickens, a going concern that is producing revenue and , hopefully, income.
Under the egg method you must have time: Time to weather the delays of a startup, the lack of customers, employees, revenues and spendable income. In fact the reality is you will most likely go deeper in the debt hole having no personal income for many months if not years. Do you have that kind of staying power (reserves)? Investors, if you can find any, will not allow you to spend their money on your living cost. So for sake of analysis let’s examine which is better, the chicken or the egg.
Your egg has a cost obviously much less than buying a group of chickens, but it does not produce current income. Let’s say you have spent $50k on your egg (idea) so far. Even when it hatches you’ll have to build up your “coup” of chickens letting other eggs hatch not taking income while this process build. You now have another $200k sunk into your business and / or debt from living expenses.
At $250k you could have bought a chicken farm, a revenue producing enterprise. You’d have debt but also income. You’d be buying a proven business because you did your due diligence, and know the stream of revenue the business has been producing. You might have to spend a few dollars for sprucing up the business; perhaps a new marketing campaign but you have INCOME!
But my egg is a fantastic idea. Could be? I hope so. BUT 75% of all new businesses fail by or before year 3 and 85% by year 5, Risky? You bet! Still want to be in business? Good. We’ll discuss alternative ways to make that happen while lowering the risk next.
Choosing Franchise Ownership over Starting from Scratch
So if I scared you by telling you before that about the 85% failure rate, you are now being realistic about your chances. I also promised a way to get into being a Florida business owner that is less risky, ready?
I’m writing this to both newbies and serial entrepreneurs; consider a proven concept with a well-established franchise. Of course you already know all about that and have been receiving vast amounts of promotional material from various Franchise development departments. They want you to buy a NEW location. While their concept might be proven, locations seldom are. However, good Franchisors have good methods for picking locations. So what do I have to say that’s different?
I suggest you seek out existing franchises that are either underperforming or the owner (franchisee) just needs or wants to get out. Franchisors know about these folks but will not suggest this upfront as their fees are much less when a transfer is made. In fact at any one time at least 20% of a Franchise portfolio is in transition or the Franchisor is looking to move out a poorly performing location because the owner is just a bad manager or lazy thinking he or she didn’t have to work at the business. This can be the “chicken” way of getting into business as there are good records and you’ll know what you are getting into. Plus, it will have revenues day one! You will most likely get into this existing location around 30% less than if you had started it. Now that’s a better deal. We like to be creative in finding deals for folks.
For you serial business folks with deeper pockets, there are often groups of locations available for many of the same reasons above. You can buy the whole package or pick and choose for a slightly higher price. Either way you get a viable, ongoing group of locations priced based on their current performance not the excellent performance you will get out of them once you apply your smart management talents.
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