4-1McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

4-2

Becoming The Owner Of A Small Business

Steps/Procedures For Steps/Procedures For Going Into BusinessGoing Into BusinessIdentify Your Niche’Identify Your Niche’Start Or BuyStart Or BuyFranchisingFranchising

Ch

apte

r

44

4-3McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

BusinessBusinessFormation & OperationFormation & Operation

4-4McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Steps To GoingSteps To GoingInto BusinessInto Business

1)1) Identify NeedIdentify Need

2)2) Study MarketStudy Market

3)3) Start, Buy Start, Buy Existing Or Existing Or FranchiseFranchise

4)4) Set Mission, Set Mission, Objectives, Objectives, Strategies Strategies

5)5) Make Make Operational Operational PlansPlans

6)6) Make Financial Make Financial PlansPlans

7)7) Develop Develop Business PlanBusiness Plan

8)8) Implement PlanImplement Plan

4-5McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Finding Your NicheFinding Your Niche

Search For Good/Service Search For Good/Service To Sell To Sell

Niche Marketing- FindingNiche Marketing- Finding

SmallSmall

ProfitableProfitable

4-6McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Searching ForSearching ForProduct/ServiceProduct/Service

NewspaperNewspaperBusiness For SaleBusiness For SaleProducts For SaleProducts For Sale

Hobbies/RecreationHobbies/RecreationTalk To PeopleTalk To PeopleObserve/Study & LuckObserve/Study & Luck

PhotoLink/Getty Images

4-7McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Questions To AskQuestions To Ask

4-8McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Government SourcesGovernment SourcesOf Advice/HelpOf Advice/Help

Small Business Administration- Small Business Administration- http://http://www.sba.govwww.sba.govService Corps Of Service Corps Of Retired ExecutivesRetired ExecutivesState Economic State Economic Development AgenciesDevelopment AgenciesU.S. Department Of Commerce- U.S. Department Of Commerce- Office Of International TradeOffice Of International Trade

4-9McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Other SourcesOther SourcesOf Advice/HelpOf Advice/Help

Directory of Trade Associations in Directory of Trade Associations in the U.S.the U.S.

Local CollegesLocal Colleges

Public LibrariesPublic Libraries

Chambers Of CommerceChambers Of Commerce

Royalty-Free/CORBIS

4-10McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

BusinessBusinessSelection ChecklistSelection Checklist

4-11McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Study MarketStudy MarketMarket Research = PotentialMarket Research = Potential

Location/Segment Being Location/Segment Being Satisfied?Satisfied?

Select 1 Market Segment Or 1 Select 1 Market Segment Or 1 ProductProduct

Limited Resources = Limited OptionsLimited Resources = Limited Options

4-12McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Estimating Market SizeEstimating Market SizeIndustry Size?Industry Size?Where Is Market?Where Is Market?How Large Is Market?How Large Is Market?Identify Target Market & It Size?Identify Target Market & It Size?Size & Distribution Of Population?Size & Distribution Of Population?Sales = Growing, Stable, Declining?Sales = Growing, Stable, Declining?Competitors = Successful?Competitors = Successful?Industry Technology?Industry Technology?Your Share?Your Share?

4-13McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Start, Buy, Or Franchise?Start, Buy, Or Franchise?

4-14McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Reasons To Start AReasons To Start ABusiness = Owner’s FreedomBusiness = Owner’s Freedom

+Define NatureDefine Nature+Physical FacilitiesPhysical Facilities+InventoryInventory+Select/Develop PersonnelSelect/Develop Personnel+Technology, etc.Technology, etc.+Competitive EnvironmentCompetitive Environment

Doug Menuez/Getty Images

4-15McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Reasons To Reasons To NotNotStart A BusinessStart A Business

Right Business?Right Business?Assemble ResourcesAssemble ResourcesEstablished Product LineEstablished Product LineProduction ProblemsProduction ProblemsMarket & DistributionMarket & DistributionSystems & ControlsSystems & ControlsStart-Up vs. Existing vs. FranchiseStart-Up vs. Existing vs. Franchise

Amos Morgan/Getty Images

4-16McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Reasons Reasons ForForBuying Existing BusinessBuying Existing Business

+Experienced EmployeesExperienced Employees+Existing FacilitiesExisting Facilities+Existing Product & MarketExisting Product & Market+Desirable LocationDesirable Location+Bank Credit RelationshipsBank Credit Relationships+Revenues, Profits, & GoodwillRevenues, Profits, & Goodwill

C Squared Studios/Getty Images

4-17McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Reasons For Reasons For NotNotBuying Existing BusinessBuying Existing Business

Facilities = Old/ObsoleteFacilities = Old/ObsoletePoor EmployeesPoor EmployeesA/R Past Due/UncollectibleA/R Past Due/UncollectibleBad LocationBad LocationPoor Financial Condition/RelationsPoor Financial Condition/RelationsInventory = Poor/ObsoleteInventory = Poor/Obsolete

Royalty-Free/CORBIS

4-18McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Questions Before BuyingQuestions Before BuyingWhy For Sale?Why For Sale?Present Owner Intentions?Present Owner Intentions?Changing Environment?Changing Environment?Facilities Suitable- Present/Future?Facilities Suitable- Present/Future?Operating Efficiently?Operating Efficiently?Financial Condition?Financial Condition?Investment?Investment?Return On Investment?Return On Investment?Price Right?Price Right?Managerial Ability?Managerial Ability?

4-19McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Reasons Reasons ForForBuying FranchiseBuying Franchise

Successful/Proven Operation & Successful/Proven Operation & ImageImage

Experience GuidanceExperience GuidanceMany To Chose FromMany To Chose FromCombines Your Talent & Combines Your Talent & DesiresDesires

4-20McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Franchise Questions?Franchise Questions?How Much Help?How Much Help?Franchise Help = Cover Costs?Franchise Help = Cover Costs?Professional AdviceProfessional Advice

LegalLegalAccountingAccounting

Source/Cost Of SuppliesSource/Cost Of Supplies

PhotoLink/Getty Images

4-21McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

CostCostInitial InvestmentInitial InvestmentRoyaltiesRoyalties

New?New?Owner Fit?Owner Fit?IndependenceIndependence““White Elephant”?White Elephant”?

Reasons For Reasons For NotNotBuying FranchiseBuying Franchise

4-22McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Franchising BenefitsFranchising BenefitsFranchisee & FranchiserFranchisee & Franchiser

4-23McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Franchising OpportunitiesFranchising Opportunities

2,552 Franchises2,552 Franchises

75 Countries75 Countries

International Franchise International Franchise Association - Association - http://http://www.franchise.orgwww.franchise.org

Jason Reed/Getty Images

4-24McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

FranchisingFranchising

Franchise AgreementFranchise Agreement

FranchiserFranchiser

FranchiseeFranchiseeRoyalty-Free/CORBIS

4-25McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

FranchisorFranchisorStartup AssistanceStartup AssistanceProven SystemProven SystemStandardized AccountingStandardized AccountingSome Financial AssistanceSome Financial AssistancePurchase/ConstructionPurchase/ConstructionTrainingTrainingAdvertising ProgramAdvertising ProgramCustomer Service StandardsCustomer Service StandardsChanging Market OpportunitiesChanging Market OpportunitiesQuantity DiscountsQuantity Discounts

4-26McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Product/Trademark FranchiseProduct/Trademark Franchise

4-27McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Business Format FranchiseBusiness Format Franchise

4-28McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Franchise PopularityFranchise PopularityAlready Identified Need, Already Identified Need, Product Created, MarketingProduct Created, Marketing

Failure Rate LowerFailure Rate Lower

Established SystemsEstablished SystemsPhotoLink/Getty Images

4-29McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Future Of FranchisingFuture Of FranchisingGrowth AreasGrowth Areas

RestaurantsRestaurantsMotelsMotelsConvenience StoresConvenience StoresTechnologyTechnologyAuto PartsAuto Parts

Two-Income FamiliesTwo-Income FamiliesGlobalGlobal

4-30McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Franchises Teaming UpFranchises Teaming Up

4-31McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Checklist ForChecklist ForFranchise InvestmentFranchise Investment