Ways of Becoming a Business Owner Section 4.2 Ways of Becoming a Business Owner

The four main ways of becoming a business owner WHAT YOU’LL LEARN The four main ways of becoming a business owner The advantages and disadvantages of each major route to business ownership

WHY IT’S IMPORTANT Awareness of the advantages and disadvantages associated with launching a business will help you make informed choices, should you decide to become an entrepreneur.

KEY TERMS start-up costs lease goodwill market outlook franchise

Ways of Becoming a Business Owner The four main ways to have your own business are to: start a new business, buy an existing business, buy a franchise, or take over the family business.

Starting a New Business If you start a new business, you will have challenges as well as rewards.

The Challenges Some of the challenges of starting a new business are the time investment required and start-up costs. Start-up costs are the expenses involved in going into business. continued

The Rewards Some of the rewards of starting a new business are: You don’t inherit a previous owner’s mistakes. You can try fresh ideas and build your business your way. continued

The Rewards You get personal satisfaction from knowing you built the business yourself.

Buying an Existing Business The reasons a successful business might be for sale are: The owners are retiring. The owners are starting a new business. continued

Buying an Existing Business Business is so good, the owners can’t handle it. The owners want more free time.

Buying an Existing Business There are many reasons why an unsuccessful business might be for sale. Take a good look at the reasons for a business’s failure. continued

Buying an Existing Business Determine whether the business’s problems can be fixed, and at what cost. You can often purchase a failing business at a reduced rate.

A Fast Start You can save on start-up costs by taking advantage of the previous owner’s business agreements. A lease is a contract to use something for a specified period of time.

A Fast Start You may not have to worry about buying or renting office furniture or equipment. The person selling the business might be a good source of advice.

A Fast Start The goodwill, or loyalty, of customers is one of a business’s most valuable assets. When you buy an existing business, you may benefit from its established reputation.

Drawbacks Some of the problems that might come with an existing business are: The location may be poor. Competition may be stiff. The market outlook, or potential for future sales, may have changed. continued

Drawbacks The building or equipment may need expensive repairs or replacement. The business may have a poor reputation.

Buying a Franchise A franchise is the legal right to sell a company’s goods and services. When you buy a franchise, you are actually buying the right to sell another company’s products.

Buying a Franchise In addition to paying for the franchise, you will continue to pay a percentage of your profits to the parent company.

Buying a Franchise You must follow the parent company’s guidelines. Guidelines often dictate how to make or distribute the goods or services.

Less Risk Some of the benefits of a franchise are: recognized product name, established management systems, business reputation and customer goodwill, continued

Less Risk training and support services, advertising, and financing.

Less Gain A franchise may be less profitable, because you pay a portion of your profits to the parent company. Since you didn’t build the company, there may also be less satisfaction.

Taking Over the Family Business Taking over the family business can be a shortcut to entrepreneurship.

Smoothing the Way Taking over the family business can have the advantages of a franchise, without the fees.

Smoothing the Way The advantages of taking over the family business are: Your relatives might help you finance the business. Family members tend to be more loyal and trust each other. continued

Smoothing the Way Family members working as a team can achieve more than individuals. Relatives can teach you the business. Customers are likely to give trust and goodwill to an owner who is part of the family they are accustomed to doing business with.

Bumps in the Road Sometimes, it’s hard to have normal business relationships with relatives. When the family is part of the business, you can’t always go home and leave the business behind.

Paths to Entrepreneurship Graphic Organizer 4.2 Paths to Entrepreneurship Buy Existing Business Buy Franchise ENTREPRENEURSHIP Take Over Family Business Start New Business Chapter 4 • Entrepreneurship Succeeding in the World of Work

Key Concept Checkpoint SECTION 4.2 REVIEW Key Concept Checkpoint Comprehension Describe four ways to enter the fast-food business. Which one do you think would offer you the best chance for success? Why? continued

Key Concept Checkpoint SECTION 4.2 REVIEW Key Concept Checkpoint Comprehension State the advantages and disadvantages of buying an existing business rather than starting a new business. continued

Key Concept Checkpoint SECTION 4.2 REVIEW Key Concept Checkpoint Critical Thinking Why should you think twice about buying a business that has a bad reputation?

Ways of Becoming a Business Owner End of Section 4.2 Ways of Becoming a Business Owner