Considering Going Out on Your Own?

Worried that you're next in line for a lay-off or pink slip? Perhaps you're just ready to be your own boss? If the answer is yes, a operating a franchise or another business opportunity may sound appealing. But getting into a business opportunity requires a lot of work upfront. Before you even write a business plan or initiate a search for financing, the Federal Trade Commission urges you to consider the following advice:

Man holds 'Open' sign outside of business.

  1. No one makes a lot of money without putting in long hours and hard work.
  2. Never pay anyone a fee in exchange for the promise of a job or earning opportunity.
  3. Research can eliminate buyer's remorse. Don't buy until you've done your homework.

What You Need to Know about Owning a Business

By law, business opportunity sellers must give you specific information to help you make an informed decision about the offer. For example, you're entitled to written disclosures from sellers of business opportunities.  Before you buy a business:

  • Study the disclosure document and proposed contract.
  • Interview current owners in person. Ask them how the information in the disclosure document matches their experiences with the company.
  • Investigate claims about your potential earnings. Broad sales claims about successful areas of business — for example, "Be a part of our $4 billion industry,"— may have no bearing on the likelihood of your success. Once you buy the business, you may be completely on your own, or competing against independent business people with much more experience than you. Be realistic about the potential, especially in the beginning, of your new venture.
  • Shop around. Compare opportunities. Just like buying a house or car, this is a major investment, not only financially, but in your time, energy and well-being. Make sure you have all the necessary information to make the choice that is right for you.
  • Listen to sales presentations with a critical ear. Be wary if the salesperson makes the job sound too easy. The thought of "easy money" may be appealing, but success generally requires hard work.
  • Get the seller's promises in writing. If a seller balks at putting oral promises in writing, it may be a hint that you should consider doing business with another firm.
  • Consider getting professional advice. Ask a lawyer, accountant, business advisor or mentor to read the disclosure document and proposed contract.
  • Check out the company with your local consumer protection agency, state Attorney General's Office, and the Better Business Bureau, not only where the company is located, but also where you live. Do a few internet searches by entering the company's name and words like "complaint" or "scam." But be wary: the absence of complaints doesn't necessarily mean the company is legitimate. Unscrupulous companies may settle complaints, change their names, or move to avoid detection.

In conclusion, entrepreneurship is a major steppingstone in life which can offer many rewards or end in disappointment. Be sure that you are prepared before making the leap.