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Select a Type of ownership

Select a Type of ownership. Run an existing business Own a Franchise Choose the Legal form of Your Business. Purchase an Existing Business. Starting your own business from scratch is not the only way to own a business You can either purchase an existing one or enter a family business

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Select a Type of ownership

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  1. Select a Type of ownership Run an existing business Own a Franchise Choose the Legal form of Your Business

  2. Purchase an Existing Business • Starting your own business from scratch is not the only way to own a business • You can either purchase an existing one or enter a family business • People sell their businesses for many different reasons • Retirement, competition, death or illness, dispute with partners, etc... • There are many different ways to find out about businesses for sale

  3. Business Broker • A person who sells businesses for a living

  4. Other ways: • Advertisements in the classifieds • Landlords and leasing agents • Lawyers and brokers • Management consultants • Chamber of Commerce • Bankruptcy announcements

  5. Advantages of buying a business • The existing business already has customers, suppliers and procedures, customer loyalty • The seller may want to train the new owner, along with experienced employees • The business already has a history of sales, expenses and profit (makes financial planning easier) • Financial arrangements can be easier (the owner may accept an initial payment and payments after, monthly instead of going to a bank for a loan)

  6. Disadvantages of buying an existing business • Many businesses are for sales because they are not making a profit. • Serious problems may be inherited (poor customer relationships may exist) • Lots of Capital $$$ is required.

  7. Steps to Purchase a Business • Write specific objectives about the kind of business you want to buy, and identify businesses for sale that meet your objectives • Meet with business sellers and brokers to investigate specific opportunities • Visit during business hours to see the company in action • Ask the owner to provide you with a complete financial accounting of operations for at least the past 3 years

  8. Steps to purchase a Business • Ask for important information in written form e.g. A list of all assets, any legal action taking place against the business, copy of the existing mortgage, a list of all suppliers. • Have an accountant and a lawyer help you review all the material • Determine how you would pay for (finance) the business • Get expert help to determine a price for the business (an accountant or valuator)

  9. Enter a Family Business • Most small businesses are family run or related

  10. Advantages of Family Business • Pride and sense of mission • Enjoy the fact that the business will remain another generation • Enjoy working with relatives (more comfortable) • Love for family is a motivating force that will push you to work that much harder

  11. Disadvantages of Family Business • Senior positions are often held by family members regardless of their ability • May be difficult to retain good employees who are not family members • Family politics • Family-life and work-life become blurred • What if there is no family member to take over the business or family member does not want to?

  12. Existing business Search • Let’s try to find existing businesses that may be on sale right now in Cambridge, Region of Waterloo, Southern Ontario or go further if you wish • Choose one that may be appealing to you and answer the following questions: • What is the business • Where is it located • What is the owner asking for in $$$$? • Does the owner have any other requests?

  13. Owning a Franchise Purchasing a franchise is another route you can take in becoming an Entrepreneur

  14. Franchise Ownership A franchise is a legal agreement that gives an individual the right to market a company’s products or services in a particular area • A franchisee is the person who purchases the franchise agreement • A franchisor is the person or company that offers a franchise for purchase

  15. Opportunities • Franchising opportunities are found in all sectors of the economy, from automotive to food, to retail to technology • E.g. Best Buy Canadian Tire McDonalds

  16. Operating Costs of a Franchise • Franchise fees • Start-up costs • Royalty fees • Advertising fees (nationwide)

  17. Initial Franchise Fee • The fee the franchise owner pays in return for the right to run the franchise. • It can run from a few thousand $’s to a few hundred thousand $’s • Usually nonrefundable

  18. Start-up Costs • Costs associated with beginning the business • Renting a facility • Equipping the outlet • Purchasing inventory

  19. Royalty Fees • Weekly or monthly payments to the franchisor • Usually determined by a percentage of the income of the franchise

  20. Advertising Fees • Fees paid to support T.V. ads, magazine ads and other ads that promote the entire franchise corporation

  21. Advantages of a Franchise • You are selling an established product or service • Franchisors offer management, technical and other assistance and supports to the franchisee to be successful • Equipment and supplies can be less expensive • A guarantee of consistency attracts customers

  22. Disadvantages of a Franchise • Franchises can cost a lot of money and cut down profits • Owners of franchises have less freedom to make decisions than other entrepreneurs • Franchisees are dependent on the performance of other franchisees in the chain • The franchisor can terminate the franchise agreement

  23. Evaluating a Franchise There are many things to consider when purchasing a franchise. You should ask the following questions to evaluate a specific franchise: • What is the projected demand for the product or service in the area that I want to locate in? • Will I be guaranteed an exclusive territory for the duration of the franchise term or can the franchisor sell additional franchises in the area?

  24. 3. What are the costs and royalty fees 4. How profitable have other franchises in the area been? 5. What do other franchisees think of the franchisor? 6. How long has the franchisor been in business? 7. How profitable is the franchisor? 8. What services does the franchisor provide? 9. Will the franchisor help me with marketing, merchandising and inventory and site selection? 10. What happens if I want to cancel the franchise agreement?

  25. Franchise Agreements To make sure that you are not being misinformed by the franchise: • Clearly read and study your documents that the franchisor gives you • Be weary of any franchise that does not back up their financial statements • Be weary of high pressure sales tactics • Never allow yourself to be pressured into making a decision too quickly • Documents are complicated • Always consult a lawyer

  26. Your turn!! • Research a franchise that interests you. Research the franchise, and then evaluate the opportunity using the questions given above. • Google your questions or go directly to the homepage of the franchise to search for answers to your questions • Write a short report (1 – 2 pages)on your findings. • At the end of your report, tell whether you think this franchise is a good opportunity

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