Select a Type of Business Chapter #4

Way to be a Business Owner Purchase an Existing Business Enter a Family Business Franchise Ownership Starting Your Own Business

Purchase an Existing Business Advantages Existing business already has customers, supplies, and procedures Sell may train a new owner Prior records of revenues, expenses and profits Financial arrangements can be easier Disadvantages Many business sell because they are not doing well Problems can be inherited Capital is required

Steps to Purchase a Business 1.Write specific objectives about the kind of business you want and find business that meet your objectives 2.Meet with business sellers to investigate opportunities 3.Visit during business hours to observe company action 4.Ask owner to provide financial accounting for at least 3 years 5.Ask for important information in writing 6.Determine how you would finance the business 7.Get expert help to determine a price to offer for the business

Enter a Family Business 90 of all business are owned by families Advantages Get to work with family members Sense of pride in keeping it with the family Cost to you is low Disadvantages Senior management is based on family on skills Family Politics are an issue Blur between family and private life Hard to sell then you want out – Family problems

Franchise Ownership Franchise – is a legal agreement that gives an individual the right to market a company’s products or services in a particular area. More than 1,400 different franchise opportunities Source to learn about franchises Consumer guide to buying a franchise Wall Street Journal Forbes ETC…

Operating Costs of a Franchise Initial Franchise Fee – fee to franchise owner pays in return for the right to run the franchise. Start Up Costs – cost associated with beginning a business (building, inventory, equipment) Royalty Fee – Monthly or weekly payments made made by the owner of the franchise to the seller of the franchise (% of their income) Advertising Fee – fees paid to support TV, Magazine, ETC – Adverting of the whole franchise.

Franchise Advantages Provided with an established product or service Get management, technical and other assistance Equipment and supplies can be less expensive Guarantee of consistency attracts customers Disadvantages Can cost a lot of money and cut down on profits Less freedom to make decisions Dependent of the performance of other franchises Franchisor can terminate agreement

Evaluating a Franchise What is the projected demand in the service area Will a get and exclusive territory What are the costs and fees How profitable have other franchises in the area been How long have they been in business What services do they provide What happens if I want to cancel the agreement

Starting Your Own Business Advantages Get to make all the decisions Get all the profit Sense of satisfaction Disadvantages No one to share ideas with Have to come up with all the money

Types of Business Arrangements Sole Proprietorship – One the business by your self Partnership- Business owned by two or more people Corporation- business with legal rights of a people and which may be owned by many people

Sole Proprietorship Advantages Total control for all business aspects Little government control Disadvantages Difficult to raise money All the risk is on you Loose your personal assets if it fails

Partnership Advantages Some one to run idea off of Share cost of starting business Another skill set Disadvantages Share profits Liable of the errors of your partner Disagreements

Partnership Agreement Must have it lined out before the start of a business

Corporations Since the corporation is like a person it not the owners pay taxes and enter into contracts. Owners of a corporation is held in the form of Shares of Stock Board of Directors Dividends

Corporations Advantages Disadvantages

S Corporation A corporation organized under subchapter S of the IRS code