While franchising is a great option for people who are interested in starting their own business, the idea of investing in a business opportunity is sometimes overlooked. Here’s why the latter might be a better option for you.
People’s motivation for wanting to invest in their own business can be very different. It may represent freedom from the corporate world, an addition to their business portfolio, or simply the fulfillment of a lifelong goal of business ownership. Luckily for those interested in becoming their own boss, there are several good options that offer a path to entrepreneurial success.
One often overlooked option for budding entrepreneurs is a business opportunity investment, which includes distributorships and license agreements. While this paradigm is similar to franchising, it has its own unique benefits and challenges. Franchising may be the right option for some, but becoming a business opportunity owner may be a better match for others.
What Is a Business Opportunity?
Similar to franchising, business opportunities offer future investors the ability to buy into a system and purchase products, services or equipment to begin their own business. The company selling the business opportunity will also provide some guidance, but on a more limited basis compared to that of a franchise.
One of the biggest differences is that in most cases, a business opportunity investor will not be licensing the business name as they would with a franchise. Franchisees represent the company as a whole in every way, resulting in a closer watch from the corporate headquarters in day-to-day operations. With a business opportunity, the entrepreneur is an independent business owner who has bought the right to sell a product or service only.
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Business opportunities often have a lower financial barrier to entry. The costs to set up and operate a franchise can be quite high requiring franchisees to pay an initial investment, called a franchise fee, in the $25k to $35k range. The initial investment in a business opportunity is typically much less. Franchisees are also on the hook for handing over a percentage of their revenue to the franchisor. The recurring payout from a business opportunity owner comes in the form of more inventory or a piece of the services sold to the end-user.
With flexibility in customizing your business model, marketing campaigns and brand development, business opportunities are also great for those who like to innovate and create new ways to grow their own business.
One prime example of a business opportunity is vending machines, which nearly everyone has hands-on experience with and understands. This opportunity has a low startup cost, low working capital requirements and low overhead. Entrepreneurs can make money on a vendine machine at any time of day, without a person having to be present, while still allowing the owner to grow their business at their own pace. Operating a vending machine can also serve as a side business, allowing you to keep your current job until their vending business is healthy enough to be a sole source income.
Is a Business Opportunity Right for You?
A business opportunity is a great option if you are the type of entrepreneur who wants to invest money and time into running a business with more flexibility than a franchise has to offer. You can become your own boss with little upfront costs or ongoing financial obligation and, ultimately, control your own future success.
The decision of whether to go the franchise or business opportunity route is very dependent on the professional and personal experience you want to gain through this next venture. There are merits and perils with business opportunity ownership, but at the end of the day, only you can make the right choice for yourself.
Eric began his career in 2002 as a franchisee of a major tanning salon brand in Atlanta where he also served as area manager and helped develop the Atlanta territory. Eric joined Franchise Gator in October 2005 as a sales representative and went on to hold several positions including sales manager and director of sales and service before becoming the General Manager in 2014. Eric is also a member of the Southeast Franchise Forum and a Certified Franchise Executive.
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