Buying a Business vs. Buying a Franchise
Posted by Kipp Krukowski on Fri, Mar 25, 2011 @ 01:07 AM
Many times with business buyers come into our office they tell us that they are considering either buying a business or buying a franchise. More often than not, one choice is clearly a better idea than the other for a given buyer as there are some significant differences between buying an existing, revenue generating business, and starting up a franchise opportunity.
It is often said in business broker and franchise consultant circles that when you buy a business you buy “history” and when you buy a franchise you buy “mystery”. Existing business purchases are based on prior year’s earnings history and the actual economic results of that business. Franchise startups are based upon projections about what the franchise could or should produce. When purchasing an existing business you may be able to write yourself a pay check right out of the gate. When starting up a new franchise you may not even have any revenue in the first few weeks.
Franchise marketing materials often use the phrase “in business for yourself, not by yourself” and the phrase is quite accurate. Business buyers who purchase an independent business are by themselves, they have no built-in support system. Franchise buyers get support and training from the franchisor. More often than not, good franchise owners don’t make good independent business owners, and vice versa.
Do you need to write yourself a paycheck as soon as you’re working in the business? If so, opt for purchasing an existing business. If you’re looking for total freedom and control in your business then head down the business purchase path. If you’re looking for support and training, then head down the franchise purchase path.
Written by: Kelcey Lehrich, Business Intermediary, Confidential Business Sale, Inc.
