You’ve decided to strike out on your own and run your own business. But with both franchises and creating your own business as options, starting out may not be as easy as it seems.
For years, you’ve worked for somebody else. While this has allowed you to develop a range of useful skills, it also means you haven’t reached your full potential. Your work puts more money into somebody else’s pocket than it does your own.
You’ve decided you need a change.
Setting up your own business allows you to take control of your career and, if done well, increase your income.
However, it can also come with complications. Doing it from scratch requires a lot of hard work, which is why buying a franchise may seem more appealing.
In this article, we look at the pros and cons of both starting a business and purchasing a franchise. In the end, you should have a good idea of which is the best choice for you.
Starting a Business – The Pros
The main benefit of starting a business is that doing so provides you with complete freedom. You’re the one who gets to choose what the business does and who it serves. As the owner, you’ll be the one to come up with the business plan and get to decide how and where you work.
In short, the shackles are off when you start your own business. You’re in complete control of your destiny.
Best of all, there’s no limit to how far you can take your own business. This differs from franchisees, who generally tend to have limitations on how much they can grow.
Your success is limited only by how good your ideas are and your ability to set up a functioning and sustainable business.
Starting a Business – The Cons
Starting a business requires a great deal of creativity.
You’re personally responsible for coming up with the ideas that will make the business successful. While this may be fulfilling to some, others may find that the pressure of remaining creative at all times leads to undue stress.
Perhaps more worrying is the failure rate attached to starting a business.
The reality is that start-up businesses have a much higher failure rate than franchise businesses. Approximately one-quarter of start-ups fail within a year, with that failure rate rising to half after five years.
There are a number of reasons for this.
Many new business owners enter the market with a deep understanding of their service skills but with a limited understanding of how to run a business. To find success as a business owner, you need to get to grips with the numbers behind your business and focus on issues you may never have handled before, such as hiring.
Furthermore, starting a business means you are in control of every aspect of the business. While this is beneficial in terms of the freedom you have, it also obligates you to create all of the systems and processes required to ensure the business operates successfully. Again, a lack of experience in these areas often contributes to the high failure rate discussed earlier.
So, starting a business is perhaps more challenging than purchasing a franchise. However, overcoming that challenge may lead to your business generating more income than a franchise is capable of.
Purchasing a Franchise – The Pros
Simplicity may be the key benefit of purchasing a franchise.
A well-established franchise will already have detailed systems and processes in place. You will have access to guidelines and training, as well as ongoing support from the franchise system. This lowers the burden of creativity, as you’re able to step into something that already works and apply it to your new business.
Having access to these proven systems also means that you have a higher chance of succeeding with a franchise than you do with your own business. Some statistics place the failure rate of franchises at between 15% and 35%. However, these numbers vary wildly depending on the franchise you join.
As a franchise owner, you’re mainly responsible for the day-to-day operations of your location. That means you get to focus more on providing a service than you do on all of the things that go on behind the scenes. Now, this doesn’t mean you don’t have to understand issues related to accounting and running a business. However, you’ll have support and systems in place to make those tasks easier.
One of the other benefits of purchasing a franchise is that they offer instant brand recognition. Customers already know what the business does, which means you don’t have to work as hard to attract people to your location. For example, companies like McDonald’s and Kentucky Fried Chicken use the franchise model. Anybody who purchases a franchise carrying these brands knows they will attract customers.
Purchasing a Franchise – The Cons
The lack of freedom may be the main disadvantage of buying a franchise.
After all, you have to follow a strict set of rules as a franchise owner. That means you likely won’t be able to change or add to the products you sell. You may even have to decorate your store in a defined way. It’s a restrictive system that limits your ability to be creative, in addition to potentially placing a limit on your earning potential.
There are also fees to consider.
The cost of purchasing a franchise typically gets split into two areas. There are the initial costs of the purchase, which require a substantial investment on your part. From there, you must pay ongoing fees to remain a part of the franchise and to retain your right to use the franchise’s brand.
Which Should You Choose?
The answer depends on your circumstances and personal ambition.
Buying a franchise is easier than starting a business because you get a rulebook to follow. If you’re brand-new to business, this can prove a valuable learning tool. Franchises do a lot of the hard work for you.
However, they also limit your freedom.
If you have a lot of ideas, starting your own business may be the better option. While you have to do a lot more work to keep your own business running, you have the freedom to do what you want with it.
Whichever choice you make, Unsecured Finance Australia is here to help you.
We offer unsecured business loans from $5,000 to $300,000 that you can use to set up your business. With 24-hour approval and minimal documentation required, you could be ready to start a new chapter in your life in no time.
Find out more about our business loans by clicking here.