Presentation on theme: "Select a Type of ownership"— Presentation transcript:
1 Select a Type of ownership Run an existing businessOwn a FranchiseChoose 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 businessYou can either purchase an existing one or enter a family businessPeople sell their businesses for many different reasonsRetirement, competition, death or illness, dispute with partners, etc...There are many different ways to find out about businesses for sale
3 Business BrokerA person who sells businesses for a living
4 Other ways: Advertisements in the classifieds Landlords and leasing agentsLawyers and brokersManagement consultantsChamber of CommerceBankruptcy announcements
5 Advantages of buying a business The existing business already has customers, suppliers and procedures, customer loyaltyThe seller may want to train the new owner, along with experienced employeesThe 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 $$$ is required.
7 Steps to Purchase a Business Write specific objectives about the kind of business you want to buy, and identify businesses for sale that meet your objectivesMeet with business sellers and brokers to investigate specific opportunitiesVisit during business hours to see the company in actionAsk the owner to provide you with a complete financial accounting of operations for at least the past 3 years
8 Steps to purchase a Business Ask for important information in written form e.g. A list of all assets, any legal action taking place against the business, copy of the existing mortgage, a list of all suppliers.Have an accountant and a lawyer help you review all the materialDetermine how you would pay for (finance) the businessGet expert help to determine a price for the business (an accountant or valuator)
9 Enter a Family Business Most small businesses are family run or related
10 Advantages of Family Business Pride and sense of missionEnjoy the fact that the business will remain another generationEnjoy working with relatives (more comfortable)Love for family is a motivating force that will push you to work that much harder
11 Disadvantages of Family Business Senior positions are often held by family members regardless of their abilityMay be difficult to retain good employees who are not family membersFamily politicsFamily-life and work-life become blurredWhat if there is no family member to take over the business or family member does not want to?
12 Existing business Search Let’s try to find existing businesses that may be on sale right now in Cambridge, Region of Waterloo, Southern Ontario or go further if you wishChoose one that may be appealing to you and answer the following questions:What is the businessWhere is it locatedWhat is the owner asking for in $$$$?Does the owner have any other requests?
13 Owning a FranchisePurchasing a franchise is another route you can take in becoming an Entrepreneur
14 Franchise OwnershipA franchise is a legal agreement that gives an individual the right to market a company’s products or services in a particular areaA franchisee is the person who purchases the franchise agreementA franchisor is the person or company that offers a franchise for purchase
15 OpportunitiesFranchising opportunities are found in all sectors of the economy, from automotive to food, to retail to technologyE.g. Best BuyCanadian TireMcDonalds
16 Operating Costs of a Franchise Franchise feesStart-up costsRoyalty feesAdvertising fees (nationwide)
17 Initial Franchise FeeThe 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 $’sUsually nonrefundable
18 Start-up Costs Costs associated with beginning the business Renting a facilityEquipping the outletPurchasing inventory
19 Royalty Fees Weekly or monthly payments to the franchisor Usually determined by a percentage of the income of the franchise
20 Advertising FeesFees 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 serviceFranchisors offer management, technical and other assistance and supports to the franchisee to be successfulEquipment and supplies can be less expensiveA guarantee of consistency attracts customers
22 Disadvantages of a Franchise Franchises can cost a lot of money and cut down profitsOwners of franchises have less freedom to make decisions than other entrepreneursFranchisees are dependent on the performance of other franchisees in the chainThe 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 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 AgreementsTo make sure that you are not being misinformed by the franchise:Clearly read and study your documents that the franchisor gives youBe weary of any franchise that does not back up their financial statementsBe weary of high pressure sales tacticsNever allow yourself to be pressured into making a decision too quicklyDocuments are complicatedAlways 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 questionsWrite 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