Which business to open: ready-made or from scratch
Which business to open, ready-made or from scratch? Evgeny Dobrinin, commercial director of Navikom JSC, the official Russian distributor of GARMIN, a manufacturer of smart wearable gadgets, reports.
Aspiring entrepreneurs often ask the question of which is better: starting a business from scratch or using a franchise. We will consider both options within the framework of the material and analyze which of them has more advantages.
Starting a Business from Scratch: Key Features
First of all, you need to remember that starting a company from scratch always requires a lot of effort, time and money. You will have to overcome many obstacles and even in the case of a competent approach, it is not at all a fact that you will be able to become the owner of your highly profitable business. Here are the important benefits of starting a business from scratch.
- An opportunity to get real experience that is more expensive than any income. You will gain knowledge and skills, and they may be useful to you in the future. And even if the first business goes out of business, then on the basis of knowledge in practice, you will know how to develop business from scratch.
- Business development in a field that interests you. There are not franchises in all areas, and in the case of your own business, you will be able to develop your own concept, create a company name, corporate identity with a suitable design. You will also be responsible for concluding contracts and choosing equipment. Therefore, if your goal is not so much profit as self-expression, this option may be quite suitable.
- Your business is always transparent. Yes, you can choose a reliable franchise with a lot of positive reviews. However, you still have to take the parent company at its word.
Moving on to the cons. Of course, we will not discuss the risks, since they are present both in the case of their own business and when buying a franchise. In the second case, they are lower, but not reduced to zero. Let's list the implicit shortcomings of your business, opened from scratch.
- More significant than risks, the disadvantage is the need to start a business from scratch, and therefore you will not know exactly how much you need to invest. Usually the amount of investment turns out to be much higher than it seemed initially. And you need to be ready for this.
- The second disadvantage is the need to gain experience from scratch. The exception is those entrepreneurs who have already tried to open their own business before and have taken into account the mistakes they made.
- Finally, starting a new business requires iron patience and nerves. Starting your own business is not easy, as you need to prepare documents, find suitable premises, conclude contracts with suppliers, and so on. And you should also remember that at first you will only invest and receive nothing. The payback of a business depends on the area and ranges from several months to several years.
Perhaps that is why, according to the statistics of the audit and consulting network FinExpertiza (source - RBC), more than 290 thousand enterprises were opened in Russia last year, and more than 600 thousand companies ceased their activities. The number of enterprises that closed during the year exceeded the number of those that were opened 2.14 times. And only in five regions did the number of new enterprises exceed the number of closed ones. Also, on average, 7 out of 10 startups go bankrupt rather quickly. The most common causes of bankruptcy in small businesses are marketing failures and lack of competence and experience. Often, a small business is bought out by a larger firm or becomes one itself. But the number of newly created firms exceeds the number of those liquidated, which leads to an absolute increase in the number of small and medium-sized businesses in the economy.
How convenient is it to buy a franchise?
According to Forbes, over the past seven years, franchising in Russia has been actively developing - the number of enterprises, according to the Russian Association of Franchising (RAF), is increasing by at least 15% per year. According to the Franshiza website, the global franchise market has been showing steady growth over the past years. The industry is expected to continue on its intended trajectory. Now let's move on to the specifics of starting a franchise business. And first of all, let's list the important advantages.
- Possibility to calculate investments in entrepreneurial activity. You become a partner of a company where the promotion and development process has already been streamlined. Therefore, at the initial stage, the basic investments are known, and the contract specifies the requirements for the premises for opening. And this greatly simplifies the work, since it allows you to act according to a ready-made debugged scheme, and not experiment from scratch.
- The second advantage is the acquisition of not just a franchise, but the ability to use both the brand and the reputation of a trusted company. Let's take an example from Garmin, a manufacturer of wearable gadgets. This corporation has existed since the late 1980s and recently launched its franchise in Russia on the basis of Navikom. Working with Garmin ensures that you are selling products from a reliable manufacturer that you can vouch for, and potential customers themselves already know that this brand guarantees excellent quality. And this, in turn, gives good sales already at the initial stage. Practice shows that the Garmin franchise pays off within 12-15 months.
- The third plus, which was already mentioned above, is a high probability of payback based on statistics from other franchisees. You will receive income in a few months if you competently meet all the requirements of the franchise holder for premises and marketing.
- In the case of the Garmin franchise, you don't just buy a ready-made business, but you get a well-recognized, well-known brand. You also receive consulting assistance in organizing a business at all stages, since the company is engaged in personnel training, provides a promotion strategy and other useful information.
Buying a franchise certainly has its drawbacks. And they are definitely worth mentioning, although there are much fewer disadvantages than in the case of starting a business from scratch. Perhaps the main disadvantage is the need to comply with the requirements of the franchise holder and coordinate their actions, as well as give away part of their profits. However, in the case of a correctly chosen franchise, the payback will come noticeably faster than in the case of opening a new business.
Also, when buying a franchise, there is always a risk of fraud on the part of the parent company. You can only be sure of honesty by carefully studying the positive and negative reviews on the network, the history of the company and the real stories of those who have already achieved success through franchising cooperation with this company. Garmin is a public company and publishes open statistics on turnover and profit on the official website (Figure 1, 2).
Baby Monitor Service
The real trouble in big cities is the catastrophic lack of time to transport children to school, kindergartens and clubs. Busy moms and dads have to go out of their way to keep up with looking after the child and earn money. In such conditions, offers of auto-nian services began to appear in large cities of the country.
They can be any girls with their own car, who can not only bring the child to pick up, but also work as a nanny. You can start such a business from scratch without investment if you have your own car. Advanced services use mobile applications that can be used to track the movement of a child around the city.
Shop on Wheels
An interesting business idea from scratch - a coffee shop on wheels, you will need a mini-bus, a coffee machine, additives, syrups, coffee, milk, disposable dishes, as well as a seller to sell goods. The size of investments for opening this business is $ 11,800, the net profit per month can reach $ 1,500.
For active sales, choosing the right location will bring you the greatest possible profit. The mobility of this business will definitely play into your hands.
In the morning and at lunchtime, you can concentrate on office workers and sell goods near large business centers. In the evening, and in the summertime at night, crowded parks and busy squares of the city center are well suited for sales.
There are many small villages and villages that simply do not have their own shop. To buy the necessary food, residents of such settlements are forced to travel to neighboring, larger villages.
A small mobile store arriving on a schedule 1 or 2 times a day will be a salvation for such villages - it is a profitable business from scratch in a small town.
Investments, taking into account the purchase of a car and essential products, will amount to $ 8,500. Profit - about $ 580 per month.
Sale of beer bouquets