1. PowerPoint Presentation
Section 3.2
Pages 43-49

2. 3.2 Starting Versus Buying a Business
What you’ll learn
The challenge of entering a family business
The benefits and drawbacks of buying a business
The responsibilities of starting your own business

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Why it’s important
Many people think that being an entrepreneur means starting a business from scratch.
Many successful entrepreneurs buy an existing business then make it better.

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Key Terms
goodwill
franchise
franchisee
franchiser
business broker

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I. SHOULD YOU ENTER AN EXISTING BUSINESS?
A. Being opportunistic does not always mean starting a business from scratch.

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B. You can enter a family business or buy an existing business.

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Discussion Starter
Make a list of local businesses in the following categories:
1. Family Business
2. New Business
3. Franchise ?
Answer: Answers will vary.

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II. ENTERING THE FAMILY BUSINESS
A. Family businesses are an important part of the U.S. economy.

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B. Family businesses are not generally high-growth businesses, but some have become very large.

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III. THE UP SIDE – AND THE DOWN OF FAMILY BUSINESSES
A. Only about one-third of family-run businesses survive to the second generation.

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B. The trust and togetherness a family shares can be a real asset.
C. A disadvantage is that family owners can never get away from the business.

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IV. QUESTIONS TO ASK BEFORE ENTERING A FAMILY BUSINESS
A. Do I have the ability to work for a family member?

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B. Do I get along well with these family members?
C. Do we share the same business goals?
D. Do we share the same general goals for our personal lives?

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Critical Thinking
Why are family businesses not always perpetuated by second generations? ?
Answer: Answers will vary, but may include different interests or changing markets.

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V. BUYING A BUSINESS
A. Buying a business may be less risky than starting one from scratch.
B. Buying a business may be attractive to one without business experience.

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VI. KINDS OF BUSINESSES AVAILABLE
A. One can buy an existing business or the right to set up a new business patterned on an existing model.

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B. An existing business already has a location and physical plant.
C. Customer loyalty to an existing business, or goodwill, is an extremely valuable business asset.

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D. McDonald’s is an example of a franchise. A franchise is a legal agreement to begin a new business in the name of a recognized company.

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E. The purchasers of franchises pay a percentage of the profits annually to the owners of the franchise.

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F. The buyer of a franchise is called the franchisee.
G. The seller is the franchiser.

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Critical Thinking
What problems might a franchiser have? ?
Answer: One problem faced by franchisers is monitoring the quality of its franchisees so that the standards of the company are not compromised.

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VII. A GOOD DEAL OR A BAD ONE?
A. Acquiring an existing business has advantages.

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1. Location
2. Goodwill
3. Staff
4. Plant
5. Inventory
6. Established procedures

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B. There are can be disadvantages to buying a business.
1. Lack of success
2. Poor reputation
3. Dated inventory
4. Poorly maintained facilities

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VIII. WHERE TO FIND A BUSINESS
A. Read the newspaper.
B. Network with others.
C. Hire a business broker, a person who brings buyers and sellers together.

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IX. QUESTIONS TO ASK YOURSELF BEFORE BUYING A BUSINESS
A. Is the business interesting?
B. Why is the owner selling?
C. What is the potential for growth of the business?

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X. STARTING YOUR OWN BUSINESS
A. There is more effort involved before even opening the doors to business.

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B. The principal benefit is that you can do things your own way.

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XI. QUESTIONS TO ASK YOURSELF
A. Do I have the motivation to start from nothing?

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B. Do I have sufficient knowledge of basic operations to undertake the business?
C. Do I have enough financial resources to start from scratch?

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XII. THE CREATIVITY FACTOR
A. Think creatively about the business you choose to enter.
B. Constantly be on the lookout for opportunity.

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End of Section 3.2