If you are interested in starting a business and thinking about buying a franchise, it will help your planning to compare the franchise opportunity with the opportunity of starting an independent business.

In a sophisticated business plan for a startup business, the business is contemplated to begin (produce a product or service for an identified market), to accomplish a profit cash flow (sell on a continuous basis to that market), to create a management structure to sustain that profit-making activity and anticipate changes, and to prepare the business for sale at a maximum value. The maximum value is obtained if at the time of sale the founders are not an integral part of the business.

In a franchise situation, the market is identified and the systems of management for accomplishing a profit cash-flow are documented. Generally a franchisee is trained in the management system, marketing techniques, and receives assistance in recruiting employees and training. For this structure a franchisee pays the franchisor significant fees. One way to look at this is that the franchisor has found a way to sell the business to many buyers (the franchisees).

If your plan is to create a business, develop the market, manage the business to work really well, train others to do the management, and sell it for maximum value, the choice of a startup business is clear. If you are a skilled manager with concerns about finding the right product and service and marketing issues, and you appreciate the structure of an established management track to cash flow, the choice of a franchise is clear.

For those in between, it pays to carefully assess the resources, skills, and markets before a decision is made. To be successful you will always have to work with others and make compromises either because of resources or other uncontrollable aspects of business. Are you looking for a wealth event (such as the sale of the business you created) or a steady cash flow (as you would hope to create from a quality franchise)? Do you have an identified product or service? Do you completely understand the market for that product or service? Will that market support a cash flow and business expansion that will allow you to create middle management and be out of the management of the business in five years? Do you have management skills to take a developed system, hire employees, train them in the system, and keep it working? Your decision should not be based on a wish list or what you like; it should be based on your realistic goals and the facts that exist at the time you need to make a decision.

Rick Riebesell is the Principal Consultant and Manager of Business Transition Consulting LLC (http://www.btcllc.net). Rick finds solutions for the problems of owners of closely-held (owner-managed) businesses. He is experienced in business transactions of all types and understands sophisticated estate planning. Rick was a practicing lawyer for over thirty years.

Business Succession Planning - Forms and Practice Manual published by Data Trace Publishing Company is Rick's latest book. Rick maintains a blog at http://blog.btcllc.net and conducts presentations concerning business succession issues.

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