Supply chain management resources


Starting Or Buying A Business

Each option involves some element of risk andA business that is marginally profitable may
reward. Whichever option you choose, however,not be able to both pay off the debt service
owning your own business offers a chance aton the loan and pay you a living
more freedom and greater financial rewards.wage.FranchisesWhen you buy a franchise, you
So, you're thinking of going into businessalso buy marketing support, business
for yourself. You have several optionsstrategy, name recognition, and assistance
available, and all involve some degree ofwith site location (if it's a retail
risk. Do you want to create a start-upoperation), among other things.However, you
operation? Perhaps you are planning on buyingalso give up some things. You will never have
an existing business. Or, you may bethe final say in all decisions, because
considering the purchase of a franchisefranchisors typically retain rights to ensure
operation.Start-upsIf you are planning onthat your business is run their way. Also,
building your business from the ground up,you won't be entitled to all of the profits
you are taking a bigger risk than if you wereof your business, because franchisors
buying an existing business or a franchise.typically take a percentage as part of their
Existing businesses and franchises have somefees. Finally, you may be limited in your
operating history that you can use to gaugedecision-making processes (e.g., some
the likelihood of the success of thefranchisors require you to buy materials from
business. By comparison, with a start-uptheir suppliers).If you are thinking of
business, you naturally think that you willpurchasing a franchise, it is very important
succeed, but there are fewer guarantees.Mostto thoroughly investigate the company.
successful start-ups don't actually beginRemember, you are doing more than just
with a new, innovative product. Instead, theypurchasing a name--the franchisor is going to
begin with a proven product or servicebe your business partner. Make sure that he
(start-up owners often open competingor she doesn't want only your money and then
businesses in areas in which they aremove on to the next potential
familiar) and become innovative after the newbuyer.Franchisors are required to disclose
venture has generated some level of profitlots of information to potential franchisees.
and success.Because your start-up has noDo your homework. Talk not only to successful
previous track record (even if you have hadfranchisees but also to ones who have failed.
success in your field), you will first needIf several former franchisees tell you that
to raise enough financing to make a go of it.the company didn't fulfill the promises of
Banks or investors will want to see a plan ofthe franchise agreement, beware.Make sure
attack before they will approve a loan forevery representation is made to you in
your start-up. Therefore, your first stepwriting before you purchase. Take notes of
should be to create a strong businesseverything said to you, and have the
plan.The business planA well-developedfranchisor sign off on them. That way, you
business plan serves several useful purposes.will have a record of what was represented to
It helps to organize thoughts and ideas aboutyou if things go wrong.Important Disclosure
how the business should be developed. It alsoNoticeThe material contained herein is not
creates a plan of attack that will help youintended to provide specific legal or tax
stay focused. And, it will assist you inadvice.It provides only broad, general
getting financing. There are severalguidelines and strategies that may be helpful
important elements to a well-preparedin shaping your financial thinking about
plan:Strong introduction: The cover page,investment objectives and risk management.The
executive summary (essentially an overview ofinformation that follows is intended to serve
the plan), and table of contents will be theas a basis for further discussion with your
first elements that potential financiers orfinancial, legal, tax and/or accounting
investors will see. If these aren't strong,advisors. It is not a substitute for
potential financiers may not take youcompetent advice from these advisors. The
seriously enough to get to the heart of youractual application of some of these concepts
plan.Business description: Whether you aremay be the practice of law and is the proper
using the business plan to get financing orresponsibility of your attorney. The
create a focus of how your business should beapplication of other concepts may require the
run, you need to present a clear vision ofguidance of a tax or accounting advisor. The
what your business will be. The descriptioncompany or companies listed below are not
should include how you want your business toauthorized to practice law or to provide
be positioned in your industry, what willlegal, tax or accounting advice.Although
make your business unique, the products orgreat effort has been taken to provide
services that you will provide, and how youaccurate data and explanations, and while the
plan on pricing within the industry. Do yousources are deemed reliable, the information
want to be the low-cost provider, or thethat follows should not be relied upon for
high-end  specialist?preparing tax returns or making investment
decisions. This information has neither been
Market positioning: If you want to attractaudited by nor verified by the company or
investors to your business, you need tocompanies listed below and is therefore not
convince them that a need in the marketplaceguaranteed by them as to its accuracy.This
exists for what you are proposing. Thisinformation includes changes made by the
section needs to include details on the sizeEconomic Growth and Taxpayer Relief
of the potential market for your business,Reconciliation Act of 2001 (EGTRRA). Many of
how your business can benefit through salesthese changes phase in or out according to
inside the market, and how you plan onvarying schedules and ultimately all of the
succeeding against your competitors.Financialchanges made by EGTRRA are scheduled to
objectives: This is perhaps the mostexpire at the end of 2010, unless Congress
important part of your business plan. Here,takes action in the interim.Long-Term Care
you need to convince your potential backersInsurance material may NOT be used with the
or lenders that your business will make apublic in the following states...Alabama,
sound investment. You'll want to show thatArizona, Arkansas, California, Delaware,
you have evaluated the attendant risks andFlorida, Georgia, Idaho, Indiana, Kansas,
rewards of your proposed business. You'llKentucky, Louisiana, Maryland, Michigan,
also need to project cash needs and expectedMinnesota, Montana, New Mexico, North
income, and present a cash flowCarolina, Oklahoma, Oregon, South Dakota,
statement.Other areas: A good business planTexas, Utah, Vermont, Virginia, West
will also cover in some detail your marketingVirginia.Securities and Investment Advisory
plan, a discussion of how you plan onservices  offered  through:
developing products to bring to market (if
the business is a manufacturing concern), andNew  England  Securities  Corporation
so on.Buying an existing businessThe obvious
advantage to buying an existing business isMember  NASD,  SIPC
that it has a proven track record of success.
But that doesn't mean that there are no501 Boylston Street, Boston, Massachusetts,
possible pitfalls that you should02117Insurance  Products  Offered  through:
avoid.Perhaps the greatest problem in buying
an existing business is that you might notNew  England  Life  Insurance  Company
acquire the expertise and services of the
existing owners, who have often accumulated501 Boylston Street, Boston, Massachusetts,
goodwill with their customers or clients.02117Long Term Care Insurance Offered
However, when a business is bought, it is notthrough:
unusual for the previous owners to stay on
for a period of time to assist with theMetropolitan Life Insurance Company, New
transition and to make introductions toYork, NY and other unaffiliated insurers
clients in an attempt to transfer some ofthrough New England Financial, Boston, MA, an
that goodwill.Consult qualified professionalsaffiliate of Metropolitan Life Insurance
to properly evaluate the information that theCompany.Please note that most long-term care
owners of the existing business may provideinsurance policies contain certain
you. Also, make sure that the reasons why theexclusions, limitations, waiting periods,
business is on the market are true. Is thereduction of benefits and terms for keeping
owner really planning on retiring to Florida,them in force. Your representative can
or is he or she just trying to escape theprovide you with full details and cost
crushing debt that the business hasinformation.L06019MJM(exp0108)MLIC-LDHarvey
accumulated over the last few years?Also,Davis J.D. is a financial advisor with the
keep in mind that you may be taking on aChesapeake Financial Group.
heavy load of debt in acquiring the business.



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