You are interested in being your own boss and have the chance to buy a franchise office-supply store that is for sale in your city. You will need outside investors to help pay the franchise fees and other start-up costs. How will you determine If this Is a good entrepreneurial opportunity and make your decision about buying the store? Before making any decisions, we will have to evaluate all the parameters of the franchiser’s uniform Franchise Offering Circular (FCC) and of the franchise agreement.
Every requirement, every cost and all resources engaged must be meticulously screened in order to establish a risk to reward ratio. In addition, since we are soliciting the help of outside investors in the realization of this project, we want to Insure their return on Investment will at least cover their Initial deposit. Last but not least, we want to ensure that the enterprise we are embarking on matches our business plan: is this location ideal; is there a market for office supplies in that area?
After we have expressed the desire to evaluate a franchise opportunity; he franchiser, by law has to provide us with the FCC and franchise agreement at least 10 days before receiving our deposit as specified by the Law. (Entrepreneur Media, Inc. ) The first step after receiving these documents is to review them for legal purposes. We will need to ensure that these documents comply with FTC regulations. In this process. We might consult a lawyer to ensure the validity of all documents. The FCC contains 23 items of information about the franchise. Entrepreneur Media, Inc. ) Among those items are sections on the history of the franchise (its founders, the umber of years it has been in business… ), sections on the financial terms (approximation of initial costs, major criminal or bankruptcy actions… ) and many more. Two sections are crucial for us in our analysis of the FCC: the section on Franchise fees and royalties and the terms of the franchise agreement, We want to fully understand them and make sure they fit our financial capableness.
If we proofread and agree with all the sections of the FCC, we want as franchiser to be confident that franchising is the best option for us. We will not own the store. We deed to understand that the franchisee controls many aspects of business such as: brand image, business processes, marketing and distribution. (Gap) Therefore, if we think our mindset leans toward ownership and control, we must step away and embark In a different venture. We must have a mindset that fully Integrates the terms of the franchise agreement and understand that they must be followed in the conduct of business.
How lucrative is this opportunity? This question is essential and we will come across it at any given point of the evaluating process. The location, our legislations with the owners of the franchise, the market, our ability to: perform, comply and succeed are all parameters of this decision. If our analysis comes to conclude that all these parameters will favor success, then we carry on and hopefully Question 4: Consider the six personality characteristics of entrepreneurs.
Which two traits do you think are the most like those of managers in large companies? Which two are least like those of managers in large companies? We believe that the two personality characteristics of entrepreneurs that are the most like managers in large nannies are self-confidence and the need to achieve. These leadership skills are suited to managers of large companies. Success criteria identified was linked directly to the idea of getting a sense of personal achievement from work.
This was particularly important for managers who had very internally focused ideas about success: for them, this achievement was often related to succeeding at challenging tasks, but sometimes was also described in terms of breaking new ground, that is doing things people had not done before, being creative and experiencing personal velveteen through work-related tasks and experiences. (Sutures, 1999) This personality characteristic is clearly one that is necessary for both entrepreneurs and corporate management.
Need to achieve is necessary for both as well, due to the fact that both entrepreneurs and corporate managers need to be “motivated to excel and pick situations in which success is likely. ” “High achievers also like to pursue goals for which they can obtain feedback about their success. ” (Daft & Marcia, 2011) For an entrepreneur, they receive positive feedback when their endeavors are successful, a corporate manager strives to be promoted to higher levels within their organization, or seek employment opportunities with bigger, more prestigious firms.
We feel the two personality characteristics of entrepreneurs that are the least like managers in large companies are the tolerance for ambiguity and internal locus of control. People who manage others in a large company have to be able to navigate through layers of bureaucracy. The need for order, accurate and complete information to guide their decisions is critical in achieving success for them and the company they work for. According to Daft and Marcia, the tolerance for ambiguity is “the psychological characteristic that allows a person to be untroubled by disorder and uncertainty. (Daft & Marcia, 2011) Further, the internal locus of control, which is “the belief by individuals that their future is within their control and that external forces have little influence,” (Daft & Marcia, 2011) does not work well with leadership in a corporation, as there needs to be accountability on every level of management. Managers have to answer to the external influence of Directors, who answer to Vice- Presidents, and so on all the way up to the CEO who is responsible to the Board of Directors, who in turn answer to the shareholders.
Question 5: How would you go about deciding whether you wanted to start a business from scratch, buy an existing business, or buy into a franchise? What information would you collect and analyze? If an entrepreneur wanted to start a business from scratch, he would need information about many things. He would have to be willing to take a large risk. The chance of a new business failing is very high. An entrepreneur is solely responsible for his business’s success. He would also have to have an idea for a business that meets the needs and requirements of its have the freedom to do whatever you want.
You can set up your business exactly the way you want it. With a franchise or an existing business you get no such freedom. Another option is to buy an existing Business. There is less risk involved with buying into a business; however the business may come with some unwanted baggage. There must be a reason a business is for sale. The previous owner could have had bad habits that caused a backlash from the community. There could have men a lack of innovation, and the business is stuck in the ways of the past.
Updating systems to meet today’s standards could prove to be very costly. Finally, an existing bad reputation could be in effect. This could prove to be a challenge to get potentially unhappy former customers back in through the door. There is an upside to buying into an existing business. One of which is that all of the preliminary paper work needed for a new business is already completed. Another is that it may not be as costly as the other business options. “The entrepreneur may et a bargain price if the owner wishes to retire or has other family considerations. (Daft & Marcia, 2011) The last option is to buy into a franchise. No new idea is needed for a franchise, because the franchise itself already has a cookie-cutter way of how everything needs to be done. One of the advantages is to buying into a franchise is that you get help from above. Corporate offers training, other managers with experience and in some cases financial support or advice to the entrepreneur. Even though the entrepreneur buys the franchise with his own money, there is much less risk involved.
To answer the question of how one should go about deciding which way to start a business, we would suggest to review the pros and cons of each option, as well as seeing which option supports your own personal goals. If an entrepreneur has a new, innovative idea, then buying a franchise couldn’t help make that idea a reality as well as a new business. If the entrepreneur doesn’t want to take as much of a risk, but still wants to be in business, a franchise might be Just the thing. If an entrepreneur sees an opportunity to buy an existing business for cheap and turn a great profit, then eying a business is most likely the right thing to do.
All are good, feasible options for business. Deciding on which route to take depends on an entrepreneur’s personal goals. Question 6: Many entrepreneurs say they did little planning, perhaps scratching notes on a legal pad. How is it possible for them to succeed? Despite the little planning that some entrepreneurs do, it seems unlikely that they could still succeed, but yet it is still possible. How is this so? According to Daft and Marcia in their book Understanding Management, “formal planning tends to be nonexistent except for the equines plan. (Daft & Marcia, 2011) A shortage of planning seems to be consistent among entrepreneurs but yet they are able to still be successful due to personality traits and work ethic. A key trait of entrepreneurs is a high energy level. With a high energy level, the individual wakes up ready to go and get the day started and is not afraid to work a twelve hour day. This trait can tend to be uncommon for many individuals who work in a Job they are not interested in, however, since the entrepreneur is starting their own business, they have a passion for what they do entrepreneurs that assists with their success is their desire and need to achieve.
So much rests on the investment that the individual has in their own business, so the success or failure of the business is typically tied directly to the livelihood of the entrepreneur. Both of these key traits go directly into the work ethic of the individual, giving them strength and energy to strive through each day as well as learn and continue to dream for their business. Despite not having much planning, most entrepreneurs are able to still be successful because they work extremely hard ACH day and are willing to learn as they go and see what the business needs each day to survive.
As Daft and Marcia say, “The primary goal is simply to remain alive. As the organization grows, formal planning usually is not instituted until the success stage. ” By saying this, they almost state that formal planning isn’t even that important to entrepreneurs until they finally make it past the survival stage and start becoming successful. (Daft & Marcia, 2011) Question #8: Many people who are successful at the start-up stage of the business are not the right people to carry the venture forward.
How do you decide whether you are better suited to be a serial entrepreneur (start the business, then move on and start another), or whether you can guide the venture as it grows and matures? It has been stated that nearly 50%-70% of start-up small business will fail within the first 18 months. (Engle, 2013) The inability to have vision for a small business is the leading cause of failure. One’s business will not make money the first day or even the first year. It typically takes 3-5 years for a small business to start making profit. (Davison, Ellis, 2014) This alarming failure rate has raised questions?
Are certain individuals particularly more qualified to start up a business, and then pass on the managing part to another individual? Just because one is suited to be entrepreneur it does not mean one is sited to lead that venture forward. Entrepreneur’s and business managers have vastly different capabilities’ and business minded virtues. An entrepreneur’s key virtual is an uncanny desire to see and create the future. Ole, 2011) With a typical business failing within the first 3-5 years it takes a truly gifted entrepreneur to see and understand how markets and the economy will be in he future to create a successful company.
Second entrepreneurs have a high-level of energy devoting immense amounts of time and energy in developing their business ideas. Lastly, entrepreneurs are able to understand time vs.. Risk measures and how timing is import when entering in the market. Entrepreneurs don’t want to develop, and introduce a company that isn’t tuned with the demands of the current market. One is more suited to manage a venture if they have a different set of virtues. A manager of a small business is more focused on daily task, and micromanagement.
A anger focus on which actions will benefit the business immediately, there is little room for down the road plans. Once the business is up and running it is up to the manager to execute and develop profits and revenue. Secondly, the manager follows the business plan and executes and runs operations based on that plan. The business plan allows for a company to have day-to-day success, as well as future success. Just because one can start up a company it does not mean one can guide the completely different business virtues, both necessary for the start up and running of a successful company.