Starting Or Buying A Business

Each option involves some element of risk andyears?Also, keep in mind that you may be taking on
reward. Whichever option you choose, however,a heavy load of debt in acquiring the business. A
owning your own business offers a chance at morebusiness that is marginally profitable may not be able
freedom and greater financial rewards. So, you'reto both pay off the debt service on the loan and
thinking of going into business for yourself. You havepay you a living wage.FranchisesWhen you buy a
several options available, and all involve some degreefranchise, you also buy marketing support, business
of risk. Do you want to create a start-up operation?strategy, name recognition, and assistance with site
Perhaps you are planning on buying an existinglocation (if it's a retail operation), among other
business. Or, you may be considering the purchase ofthings.However, you also give up some things. You
a franchise operation.Start-upsIf you are planning onwill never have the final say in all decisions, because
building your business from the ground up, you arefranchisors typically retain rights to ensure that your
taking a bigger risk than if you were buying anbusiness is run their way. Also, you won't be entitled
existing business or a franchise. Existing businessesto all of the profits of your business, because
and franchises have some operating history that youfranchisors typically take a percentage as part of
can use to gauge the likelihood of the success of thetheir fees. Finally, you may be limited in your
business. By comparison, with a start-up business,decision-making processes (e.g., some franchisors
you naturally think that you will succeed, but thererequire you to buy materials from their suppliers).If
are fewer guarantees.Most successful start-ups don'tyou are thinking of purchasing a franchise, it is very
actually begin with a new, innovative product.important to thoroughly investigate the company.
Instead, they begin with a proven product or serviceRemember, you are doing more than just purchasing
(start-up owners often open competing businesses ina name--the franchisor is going to be your business
areas in which they are familiar) and becomepartner. Make sure that he or she doesn't want only
innovative after the new venture has generatedyour money and then move on to the next potential
some level of profit and success.Because yourbuyer.Franchisors are required to disclose lots of
start-up has no previous track record (even if youinformation to potential franchisees. Do your
have had success in your field), you will first need tohomework. Talk not only to successful franchisees
raise enough financing to make a go of it. Banks orbut also to ones who have failed. If several former
investors will want to see a plan of attack beforefranchisees tell you that the company didn't fulfill the
they will approve a loan for your start-up. Therefore,promises of the franchise agreement, beware.Make
your first step should be to create a strong businesssure every representation is made to you in writing
plan.The business planA well-developed business planbefore you purchase. Take notes of everything said
serves several useful purposes. It helps to organizeto you, and have the franchisor sign off on them.
thoughts and ideas about how the business should beThat way, you will have a record of what was
developed. It also creates a plan of attack that willrepresented to you if things go wrong.Important
help you stay focused. And, it will assist you inDisclosure NoticeThe material contained herein is not
getting financing. There are several importantintended to provide specific legal or tax advice.It
elements to a well-prepared plan:Strong introduction:provides only broad, general guidelines and strategies
The cover page, executive summary (essentially anthat may be helpful in shaping your financial thinking
overview of the plan), and table of contents will beabout investment objectives and risk
the first elements that potential financiers ormanagement.The information that follows is intended
investors will see. If these aren't strong, potentialto serve as a basis for further discussion with your
financiers may not take you seriously enough to getfinancial, legal, tax and/or accounting advisors. It is
to the heart of your plan.Business description:not a substitute for competent advice from these
Whether you are using the business plan to getadvisors. The actual application of some of these
financing or create a focus of how your businessconcepts may be the practice of law and is the
should be run, you need to present a clear vision ofproper responsibility of your attorney. The application
what your business will be. The description shouldof other concepts may require the guidance of a tax
include how you want your business to be positionedor accounting advisor. The company or companies
in your industry, what will make your business unique,listed below are not authorized to practice law or to
the products or services that you will provide, andprovide legal, tax or accounting advice.Although great
how you plan on pricing within the industry. Do youeffort has been taken to provide accurate data and
want to be the low-cost provider, or the high-endexplanations, and while the sources are deemed
specialist?reliable, the information that follows should not be
Market positioning: If you want to attract investorsrelied upon for preparing tax returns or making
to your business, you need to convince them that ainvestment decisions. This information has neither
need in the marketplace exists for what you arebeen audited by nor verified by the company or
proposing. This section needs to include details on thecompanies listed below and is therefore not
size of the potential market for your business, howguaranteed by them as to its accuracy.This
your business can benefit through sales inside theinformation includes changes made by the Economic
market, and how you plan on succeeding againstGrowth and Taxpayer Relief Reconciliation Act of
your competitors.Financial objectives: This is perhaps2001 (EGTRRA). Many of these changes phase in or
the most important part of your business plan. Here,out according to varying schedules and ultimately all
you need to convince your potential backers orof the changes made by EGTRRA are scheduled to
lenders that your business will make a soundexpire at the end of 2010, unless Congress takes
investment. You'll want to show that you haveaction in the interim.Long-Term Care Insurance
evaluated the attendant risks and rewards of yourmaterial may NOT be used with the public in the
proposed business. You'll also need to project cashfollowing states...Alabama, Arizona, Arkansas,
needs and expected income, and present a cash flowCalifornia, Delaware, Florida, Georgia, Idaho, Indiana,
statement.Other areas: A good business plan will alsoKansas, Kentucky, Louisiana, Maryland, Michigan,
cover in some detail your marketing plan, a discussionMinnesota, Montana, New Mexico, North Carolina,
of how you plan on developing products to bring toOklahoma, Oregon, South Dakota, Texas, Utah,
market (if the business is a manufacturing concern),Vermont, Virginia, West Virginia.Securities and
and so on.Buying an existing businessThe obviousInvestment Advisory services offered through:
advantage to buying an existing business is that itNew England Securities Corporation
has a proven track record of success. But thatMember NASD, SIPC
doesn't mean that there are no possible pitfalls that501 Boylston Street, Boston, Massachusetts,
you should avoid.Perhaps the greatest problem in02117Insurance Products Offered through:
buying an existing business is that you might notNew England Life Insurance Company
acquire the expertise and services of the existing501 Boylston Street, Boston, Massachusetts,
owners, who have often accumulated goodwill with02117Long Term Care Insurance Offered through:
their customers or clients. However, when a businessMetropolitan Life Insurance Company, New York, NY
is bought, it is not unusual for the previous owners toand other unaffiliated insurers through New England
stay on for a period of time to assist with theFinancial, Boston, MA, an affiliate of Metropolitan Life
transition and to make introductions to clients in anInsurance Company.Please note that most long-term
attempt to transfer some of that goodwill.Consultcare insurance policies contain certain exclusions,
qualified professionals to properly evaluate thelimitations, waiting periods, reduction of benefits and
information that the owners of the existing businessterms for keeping them in force. Your representative
may provide you. Also, make sure that the reasonscan provide you with full details and cost
why the business is on the market are true. Is theinformation.L06019MJM(exp0108)MLIC-LDHarvey
owner really planning on retiring to Florida, or is he orDavis J.D. is a financial advisor with the Chesapeake
she just trying to escape the crushing debt that theFinancial Group.
business has accumulated over the last few