By Jessica Deets

Many people dream of being their own boss, setting their own hours and having no boundaries on their potential. Creating a new business idea, however, can be harder than working nine to five for someone else. Getting that new business off the ground, too, can be the hardest thing a person will ever do. For those who want a reasonable guarantee of success, franchises are often the way to go.

The key to making sure success goes along with a franchise business is finding the right one for you. Some people are more suited to one type of business than another. Finding the right fit is vital for ensuring your drive stays high to get the business through its start-up phase. The amount of time and energy involved, even with a franchise, is more than many suspect, so a strong desire to succeed must be coupled with a lot of enthusiasm.

Another major consideration before choosing a franchise type is the fact different markets present varying opportunities for success for one type of business over another. A market study is almost required, or at least a good survey of existing businesses.

Here are some major points to consider before buying into a franchise:
* Your personal interests. If you love to make cookies and cakes, but hate to clean, a bakery franchise might be in order. A franchise that involves commercial cleaning would likely be a dud in your case. Half the battle in creating a successful business is the drive and enthusiasm of the people behind the business. If it doesn’t sound like fun or at least very interesting, it won’t be to you, your employees and most importantly your customers.
* Your market. Study the area in which you’d like to open. If there are 15 fast-food restaurants, but only one sit-down establishment, your niche is clear. If there’s 10 carpet cleaning companies, but only two that handle full service cleaning of homes and offices, that might be the ticket. A market that’s over saturated isn’t good for a business’ chances for success. Find a concept that will be unique or relatively so in your area that’s also desired by the community and you should be able to maximize your potential for success.
* The acceptance level of the franchise you’re looking at. Some franchises are almost guaranteed success based on their name recognition alone. Others will require more work, but can still be a hit depending on the quality of the products or services offered. Getting in on the ground floor of a new franchise can be very lucrative, but make sure you yourself believe in the product or service. If you don’t, your customers probably won’t either.
* Cost. The big name franchises can cost a lot to start up. The smaller, newer ones, however, often are much more affordable. These sometimes will even offer funding assistance. Just make sure the other criteria has been met before diving in.

A franchise can be a great way to get into owning your own business without having to endure the feeling of totally going it alone. With trademarked products and/or services, a good franchise offers recognition a new business can’t generally get on its own.

About The Author

Jessica Deets writes about franchises and you can find more news and information about camping at the website Franchise Knowledge .

By Dave Kauppi

Not Recommended for Companies with Sales Greater than $1 Million

PURPOSE: To provide a quick guide to business owners that desire to sell their business but do not want a significant portion of the transaction value to go to a business broker or M&A intermediary.

1. Have an idea what your company is worth. The most common rule of thumb is that buyers usually pay a multiple of EBITDA. The normal range is a selling price between 3 and 5 times EBITDA. There are exceptions to this rule, but if you have a main street business, you generally fall in that range. If you are a member of an industry association, they may be helpful to you in identifying industry multiples or resources that can help you determine a selling price range.

2. Create a blind profile. It is a brief summary of your company and is designed to communicate the key points about your acquisition opportunity without giving away your company’s identity.

3. Have a Confidentiality Agreement or a Non Disclosure Agreement executed if a potential buyer shows interest in your company.

4. Create a database of Target Acquisition Prospects. You may already know the most likely buyers, but those most likely buyers may also do damage to your business if they determine you are for sale. Your industry or trade associations and trade publications will be helpful. If you want to expand to those potential buyers to a greater universe, I recommend creating a database using one of the database service. You can do a search by location, company size, SIC Code and other criteria to arrive at your selection criteria. There is a charge for this service or a charge for each company you select, and you have to subscribe and do the search yourself.

5. I personally like to call the prospects because sending a mailing is very ineffective these days. Once I get the CEO on the phone, I try to get their interest with a 30 second elevator speech. If he/she is interested, I ask for the email address and email a copy of the Blind Profile and the Confidentiality Agreement and request its execution and return via fax before any more information is exchanged.

6. Post your business on some business for sale web sites.

7. Have the last three years tax returns that reflect the company’s performance available. Create an Executive Summary for potential buyers. A sample Table of Contents is below:
§ OVERVIEW
§ STOCKHOLDERS’ MOTIVATIONS
§ GROWTH HIGHLIGHTS
§ BUSINESS SUMMARY
§ MANAGEMENT ORGANIZATION
§ KEY EMPLOYEES
§ CRITICAL COMPANY MILESTONES
§ FAQ’s AND ADDITIONAL DETAILS
§ EBITDA ANALYSIS (000’s)
§ MARKET BALANCE SHEET

8. After Confidentiality Agreements are executed and you have provided the Executive Summary or whatever information the buyer has requested, you should arrange a buyer visit to further explore the acquisition potential.

9. If they are interested push for a Qualified Letter of Intent (LOI) or Term Sheet. This basically lays out the transaction economics prior to due diligence. The basic concept is that if I (the buyer) can validate what you have told me about your business and find no negative surprises, these are the terms of my purchase offer. It is a non-binding letter and is used to move the process forward. The buyer will normally ask you to stop talking with other buyers if you accept his LOI. He wants to know that if he is going to invest his resources in due diligence, you are not going to shop his number to other buyers.

10. Try to limit the period of due diligence to no more than 45 days. If the buyer finds unexpected issues, they will usually try to adjust their offer downward. It is just part of the process. Just make sure you reveal any warts before he finds them in due diligence.

11. Once that is completed, the buyer’s attorney will draw up Definitive Purchase Agreements and submit them to you. Do not attempt to complete this process without an attorney. You need their help to make sure you understand the contracts and to make sure you are reasonably protected. Do not, I repeat, do not attempt to renegotiate the economics of the deal at this point. It will blow up. You are only dealing with legal issues at this point.

12. Cash Your Check (do not be surprised if you are asked to carry some portion of the purchase price as a seller note). Over half of all business sales involve some form of seller financing. The smaller the company, the higher the percentage. Go to your island and drink your umbrella drinks. Good Luck.

About The Author

Dave Kauppi is a business broker and President of MidMarket Capital. We help business owners with all aspects of Mergers and Acquisitions.