| Each option involves some element of risk and reward. | | | | the last few years?Also, keep in mind that you may |
| Whichever option you choose, however, owning your | | | | be taking on a heavy load of debt in acquiring the |
| own business offers a chance at more freedom and | | | | business. A business that is marginally profitable may |
| greater financial rewards. So, you're thinking of going | | | | not be able to both pay off the debt service on the |
| into business for yourself. You have several options | | | | loan and pay you a living wage.FranchisesWhen you |
| available, and all involve some degree of risk. Do you | | | | buy a franchise, you also buy marketing support, |
| want to create a start-up operation? Perhaps you are | | | | business strategy, name recognition, and assistance |
| planning on buying an existing business. Or, you may be | | | | with site location (if it's a retail operation), among other |
| considering the purchase of a franchise | | | | things.However, you also give up some things. You will |
| operation.Start-upsIf you are planning on building your | | | | never have the final say in all decisions, because |
| business from the ground up, you are taking a bigger | | | | franchisors typically retain rights to ensure that your |
| risk than if you were buying an existing business or a | | | | business is run their way. Also, you won't be entitled to |
| franchise. Existing businesses and franchises have | | | | all of the profits of your business, because franchisors |
| some operating history that you can use to gauge the | | | | typically take a percentage as part of their fees. Finally, |
| likelihood of the success of the business. By | | | | you may be limited in your decision-making processes |
| comparison, with a start-up business, you naturally think | | | | (e.g., some franchisors require you to buy materials |
| that you will succeed, but there are fewer | | | | from their suppliers).If you are thinking of purchasing a |
| guarantees.Most successful start-ups don't actually | | | | franchise, it is very important to thoroughly investigate |
| begin with a new, innovative product. Instead, they | | | | the company. Remember, you are doing more than |
| begin with a proven product or service (start-up | | | | just purchasing a name--the franchisor is going to be |
| owners often open competing businesses in areas in | | | | your business partner. Make sure that he or she |
| which they are familiar) and become innovative after | | | | doesn't want only your money and then move on to |
| the new venture has generated some level of profit | | | | the next potential buyer.Franchisors are required to |
| and success.Because your start-up has no previous | | | | disclose lots of information to potential franchisees. Do |
| track record (even if you have had success in your | | | | your homework. Talk not only to successful |
| field), you will first need to raise enough financing to | | | | franchisees but also to ones who have failed. If |
| make a go of it. Banks or investors will want to see a | | | | several former franchisees tell you that the company |
| plan of attack before they will approve a loan for your | | | | didn't fulfill the promises of the franchise agreement, |
| start-up. Therefore, your first step should be to create | | | | beware.Make sure every representation is made to |
| a strong business plan.The business planA | | | | you in writing before you purchase. Take notes of |
| well-developed business plan serves several useful | | | | everything said to you, and have the franchisor sign |
| purposes. It helps to organize thoughts and ideas about | | | | off on them. That way, you will have a record of what |
| how the business should be developed. It also creates | | | | was represented to you if things go wrong.Important |
| a plan of attack that will help you stay focused. And, it | | | | Disclosure NoticeThe material contained herein is not |
| will assist you in getting financing. There are several | | | | intended to provide specific legal or tax advice.It |
| important elements to a well-prepared plan:Strong | | | | provides only broad, general guidelines and strategies |
| introduction: The cover page, executive summary | | | | that may be helpful in shaping your financial thinking |
| (essentially an overview of the plan), and table of | | | | about investment objectives and risk management.The |
| contents will be the first elements that potential | | | | information that follows is intended to serve as a basis |
| financiers or investors will see. If these aren't strong, | | | | for further discussion with your financial, legal, tax and |
| potential financiers may not take you seriously enough | | | | or accounting advisors. It is not a substitute for |
| to get to the heart of your plan.Business description: | | | | competent advice from these advisors. The actual |
| Whether you are using the business plan to get | | | | application of some of these concepts may be the |
| financing or create a focus of how your business | | | | practice of law and is the proper responsibility of your |
| should be run, you need to present a clear vision of | | | | attorney. The application of other concepts may |
| what your business will be. The description should | | | | require the guidance of a tax or accounting advisor. |
| include how you want your business to be positioned in | | | | The company or companies listed below are not |
| your industry, what will make your business unique, the | | | | authorized to practice law or to provide legal, tax or |
| products or services that you will provide, and how | | | | accounting advice.Although great effort has been |
| you plan on pricing within the industry. Do you want to | | | | taken to provide accurate data and explanations, and |
| be the low-cost provider, or the high-end specialist? | | | | while the sources are deemed reliable, the information |
| Market positioning: If you want to attract investors to | | | | that follows should not be relied upon for preparing tax |
| your business, you need to convince them that a need | | | | returns or making investment decisions. This |
| in the marketplace exists for what you are proposing. | | | | information has neither been audited by nor verified by |
| This section needs to include details on the size of the | | | | the company or companies listed below and is |
| potential market for your business, how your business | | | | therefore not guaranteed by them as to its |
| can benefit through sales inside the market, and how | | | | accuracy.This information includes changes made by |
| you plan on succeeding against your | | | | the Economic Growth and Taxpayer Relief |
| competitors.Financial objectives: This is perhaps the | | | | Reconciliation Act of 2001 (EGTRRA). Many of these |
| most important part of your business plan. Here, you | | | | changes phase in or out according to varying |
| need to convince your potential backers or lenders | | | | schedules and ultimately all of the changes made by |
| that your business will make a sound investment. You'll | | | | EGTRRA are scheduled to expire at the end of 2010, |
| want to show that you have evaluated the attendant | | | | unless Congress takes action in the interim.Long-Term |
| risks and rewards of your proposed business. You'll | | | | Care Insurance material may NOT be used with the |
| also need to project cash needs and expected | | | | public in the following states...Alabama, Arizona, |
| income, and present a cash flow statement.Other | | | | Arkansas, California, Delaware, Florida, Georgia, Idaho, |
| areas: A good business plan will also cover in some | | | | Indiana, Kansas, Kentucky, Louisiana, Maryland, |
| detail your marketing plan, a discussion of how you | | | | Michigan, Minnesota, Montana, New Mexico, North |
| plan on developing products to bring to market (if the | | | | Carolina, Oklahoma, Oregon, South Dakota, Texas, |
| business is a manufacturing concern), and so on.Buying | | | | Utah, Vermont, Virginia, West Virginia.Securities and |
| an existing businessThe obvious advantage to buying | | | | Investment Advisory services offered through: |
| an existing business is that it has a proven track | | | | New England Securities Corporation |
| record of success. But that doesn't mean that there | | | | Member NASD, SIPC |
| are no possible pitfalls that you should avoid.Perhaps | | | | 501 Boylston Street, Boston, Massachusetts, |
| the greatest problem in buying an existing business is | | | | 02117Insurance Products Offered through: |
| that you might not acquire the expertise and services | | | | New England Life Insurance Company |
| of the existing owners, who have often accumulated | | | | 501 Boylston Street, Boston, Massachusetts, |
| goodwill with their customers or clients. However, | | | | 02117Long Term Care Insurance Offered through: |
| when a business is bought, it is not unusual for the | | | | Metropolitan Life Insurance Company, New York, NY |
| previous owners to stay on for a period of time to | | | | and other unaffiliated insurers through New England |
| assist with the transition and to make introductions to | | | | Financial, Boston, MA, an affiliate of Metropolitan Life |
| clients in an attempt to transfer some of that | | | | Insurance Company.Please note that most long-term |
| goodwill.Consult qualified professionals to properly | | | | care insurance policies contain certain exclusions, |
| evaluate the information that the owners of the | | | | limitations, waiting periods, reduction of benefits and |
| existing business may provide you. Also, make sure | | | | terms for keeping them in force. Your representative |
| that the reasons why the business is on the market | | | | can provide you with full details and cost |
| are true. Is the owner really planning on retiring to | | | | information.L06019MJM(exp0108)MLIC-LDHarvey Davis |
| Florida, or is he or she just trying to escape the | | | | J.D. is a financial advisor with the Chesapeake Financial |
| crushing debt that the business has accumulated over | | | | Group. |