How to choose the right How to choose the right business for youbusiness for you

Kelly EllisKelly Ellis

AgendaAgenda

What hope to accomplish today:What hope to accomplish today: Know more about yourselfKnow more about yourself Figure out a process that works for youFigure out a process that works for you Know more about your optionsKnow more about your options Feel more confident about your next stepsFeel more confident about your next steps

My InfoMy Info

Married, 2 kidsMarried, 2 kids Two Businesses:Two Businesses: Commercial Real EstateCommercial Real Estate The Entrepreneur AuthorityThe Entrepreneur Authority

Passions: Golf, playing with my boys, Passions: Golf, playing with my boys, helping othershelping others

Why are you here?

FACTFACT

►►From Michele Lind, Small Business Expert, From Michele Lind, Small Business Expert, at NPR (at NPR (www.npr.orgwww.npr.org):):

75% of small businesses go out of business 75% of small businesses go out of business within the first 5 years.within the first 5 years.

#1 reason small businesses fail: Run out of #1 reason small businesses fail: Run out of money.money.

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Be Your Own BossBe Your Own Boss

Less TravelLess Travel

Build EquityBuild Equity

Leave a LegacyLeave a Legacy

New ChallengesNew Challenges

Build My Own TeamBuild My Own Team

Career StabilityCareer Stability

Add New Income Add New Income StreamStream

More Community More Community InvolvementInvolvement

Small Business Tax BenefitsSmall Business Tax Benefits

Financial IndependenceFinancial Independence

Better Income PotentialBetter Income Potential

Flexible Schedule/Life Flexible Schedule/Life BalanceBalance

Escape From CorporateEscape From Corporate

PoliticsPolitics

Why Are You Here?…Why Are You Here?…

Entrepreneur QuizEntrepreneur Quiz

►►Simple questions.Simple questions.

►►Answer honestly, then sum the total at the Answer honestly, then sum the total at the end. end.

Who are you?Who are you?

►► Describe your risk toleranceDescribe your risk tolerance►►High RiskHigh Risk►►MediumMedium►►LowLow

►► Describe your Strengths / Weaknesses (2 Describe your Strengths / Weaknesses (2 columns)columns)

►► Financial SituationFinancial Situation How much money are you willing to put into your How much money are you willing to put into your

businessbusiness How long can you go with no income?How long can you go with no income?

►► Sales Sales vsvs Ops?Ops?►► What is your exit strategy for your business?What is your exit strategy for your business?

Additionally …Additionally …

►►What are you passionate about?What are you passionate about?►►How much money are you wanting to How much money are you wanting to

make? make? ►►What does your ideal day look like?What does your ideal day look like?►►Do you have the support of others in your Do you have the support of others in your

immediate family?immediate family?

““ I want a business where I can I want a business where I can make a high 6make a high 6--figure income, in figure income, in my first year, putting little or no money my first year, putting little or no money down. I want the business to have very down. I want the business to have very high margins with no direct competition. high margins with no direct competition. It must be something that is very proven It must be something that is very proven and established, and of course not yet in and established, and of course not yet in my market. I want to be able to not my market. I want to be able to not work nights, weekends and I would work nights, weekends and I would rather not have to deal with many rather not have to deal with many customers or employees. Oh, and put in customers or employees. Oh, and put in on hold for me for 6 months while I on hold for me for 6 months while I make mind up.”make mind up.” 10

Here’s the answer!Here’s the answer!

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Ultra Conservative/ Corporate

Ultra Entrepreneurial/ Independent

ESQ 0-118

ESQ 119-181

ESQ 182-210

Know thyself … Where are you on the risk Know thyself … Where are you on the risk scale?scale?

New Business OptionsNew Business Options

►►Unique PatentUnique Patent►►InventionInvention►►New way to use an old productNew way to use an old product►►RetailRetail►►ServicesServices►►ManufacturingManufacturing►►LegalLegal

Concepts can be …Concepts can be …

►►Capitalizing on latest trendsCapitalizing on latest trends►►Hot new conceptHot new concept►►Proven conceptsProven concepts►►Bad IdeasBad Ideas

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Future Career OptionsFuture Career Options

OPTION COST RISK EQUITY

BUY Business

BusinessStart Up (From Scratch)

Buy Franchise

MED –HIGH

LOW –MED

MED –HIGH

LOW –HIGH++

MED –HIGH

MED –HIGH

?

Employment

LOW –MED

LOW –MED

INCOMEREWARD

LOW

MED –HIGH

?

LOW –MED

LIFE-STYLE

MED –HIGH

HIGH

LOW LOW

LOW –HIGH

?

HIGH ++ ?

MED –HIGH

MED –HIGH

Owners should have some companyOwners should have some company--owned units for training owned units for training and R&Dand R&D

Owners should be growing regionally toward market Owners should be growing regionally toward market share, not “buck shooting” nationallyshare, not “buck shooting” nationally

Franchisor must treat franchisees as working partnersFranchisor must treat franchisees as working partners Shoot for a >20+% return on investment…no guaranteesShoot for a >20+% return on investment…no guarantees “Clean” UFOC, low incidence of failures/terminations“Clean” UFOC, low incidence of failures/terminations Don’t pick a “fad” business Don’t pick a “fad” business Choose something that you would consume or patronizeChoose something that you would consume or patronize Business should be unique with competitive advantagesBusiness should be unique with competitive advantages SOMETHING YOU CAN BE PASSIONATE ABOUT!SOMETHING YOU CAN BE PASSIONATE ABOUT!

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If buying another business or If buying another business or choosing a franchise …choosing a franchise …

►► GreenGreen►► Consulting concepts (large talent pool)Consulting concepts (large talent pool)►► CreativelyCreatively--themed concepts (Retailthemed concepts (Retail--tainmenttainment))►► Healthy fast foods with taste Healthy fast foods with taste

(61% adults overweight)(61% adults overweight)►► Health, Health, & HealthHealth, Health, & Health--related (Baby Boomers)related (Baby Boomers)►► Financial (factoring, equipment leasing)Financial (factoring, equipment leasing)►► Trash hauling / Moving conceptsTrash hauling / Moving concepts►► CyberCyber--cafescafes►► Privatization/Outsourcing of government businesses Privatization/Outsourcing of government businesses ►► HomeHome--Based, lowBased, low--overhead business conceptsoverhead business concepts►► MultipleMultiple--unit / Master Franchising opportunitiesunit / Master Franchising opportunities►► …and much more…and much more

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Small Business Ownership Trends…Small Business Ownership Trends…

Franchises are mostly about Franchises are mostly about burgers, shakes & friesburgers, shakes & fries

Franchises are just buying yourself a jobFranchises are just buying yourself a job Franchises should align to either ones Franchises should align to either ones

industry background or favorite hobby industry background or favorite hobby to be the best fitto be the best fit

Franchises are expensiveFranchises are expensive Franchises don’t allow franchisee inputFranchises don’t allow franchisee input Franchises are mostly 24/7 operationsFranchises are mostly 24/7 operations

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Debunking The Myths about Franchising …Debunking The Myths about Franchising …

Total Investment

What Does a typical franchise cost? What Does a typical franchise cost?

Percent$150K and under

$150K to $300K

$300K to $500K

Over $500K

52.5%

32.7%

9.2%

5.6%

Source: Franchise Times Magazine 2005

1.1. Obtaining Earnings Claim InformationObtaining Earnings Claim Information2.2. Don’t want to be “Sold” Don’t want to be “Sold” –– this is serious stuffthis is serious stuff3.3. Who can you trust?Who can you trust?4.4. Really knowing where you are on the risk scaleReally knowing where you are on the risk scale5.5. Working through all of the costs Working through all of the costs –– really knowing really knowing

where you standwhere you stand6.6. Bothering with writing a business planBothering with writing a business plan7.7. Working through the Loan ProcessWorking through the Loan Process8.8. Actually finding / negotiating a physical place to Actually finding / negotiating a physical place to

do business (if needed)do business (if needed)

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Most Common Frustrations in starting your Most Common Frustrations in starting your own business …own business …

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1.1. Not doing enough self analysis Not doing enough self analysis –– what are your “unique” buyer values?what are your “unique” buyer values?

2.2. Not digging in to really understand the financial impact, costs,Not digging in to really understand the financial impact, costs, exit strategy, etc. exit strategy, etc.

3.3. Not being suited to doing it all yourself, without administrativNot being suited to doing it all yourself, without administrative support. e support.

4.4. Only looking at what are perceived to be the “hottest” conceptsOnly looking at what are perceived to be the “hottest” concepts

5.5. Trusting everything you read on the internetTrusting everything you read on the internet

6.6. Forgetting that it is a mutual assessment (You / Franchisor)Forgetting that it is a mutual assessment (You / Franchisor)

7.7. Too analytical or too intuitive (Analysis Paralysis)Too analytical or too intuitive (Analysis Paralysis)

8.8. Not seeking the advice of those you trust in your decision makinNot seeking the advice of those you trust in your decision making process g process

9.9. Going with the least expensive / cheapest royalty businessGoing with the least expensive / cheapest royalty business

10.10. Not realizing the time it really takes to be successfulNot realizing the time it really takes to be successful

A few mistakes to watch out for …A few mistakes to watch out for …

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Need For A Legal ExpertNeed For A Legal Expert

►►What is an UFOC?What is an UFOC?►►What is negotiable in a contract?What is negotiable in a contract?►►What are nonWhat are non--compete clauses?compete clauses?►►What is the basis of an earnings claim?What is the basis of an earnings claim?►►What are my rights to full disclosure?What are my rights to full disclosure?►►What are my contractual obligations?What are my contractual obligations?►►What are the Franchisor’s obligations?What are the Franchisor’s obligations?►►How do I improve my odds for success?How do I improve my odds for success?

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Financial ExpertiseFinancial Expertise

►► How do I finance a Franchise?How do I finance a Franchise?►► Which type of business entity isWhich type of business entity is

most tax efficient?most tax efficient?►► How do I protect for financial liability?How do I protect for financial liability?►► What federal, state and local regulations What federal, state and local regulations

effect my business financially?effect my business financially?►► What is the best way to track my financial What is the best way to track my financial

transactions?transactions?

Bank FinancingBank FinancingHome EquityHome EquitySBASBAAutomobile Automobile

FinancingFinancingBank Lines of CreditBank Lines of CreditLeasingLeasing401K/ IRA monies401K/ IRA monies

Credit Card Credit Card FinancingFinancingFamily/Friends/ Family/Friends/

Relatives (OPM)Relatives (OPM)InvestorsInvestorsVenture CapitalVenture CapitalFranchisor / Franchisor /

Business Owner of Business Owner of Existing BusinessExisting Business

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Funding Your Business…Funding Your Business…

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Questions ?…Questions ?…

Spend a few minutes, write down next stepsSpend a few minutes, write down next steps

Write down your challengesWrite down your challenges

Write down your concernsWrite down your concerns

Who’s going to be part of your team of advisorsWho’s going to be part of your team of advisors

Start evaluating the suitability of the optionsStart evaluating the suitability of the options

Build your Success TeamBuild your Success Team

What’s holding you back?What’s holding you back?

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Call To Action…Call To Action…

Reference Reference

►►Self AnalysisSelf Analysis keirsey.comkeirsey.com SelfSelf--directeddirected--search.comsearch.com Analyzemycareer.comAnalyzemycareer.com Careerplanner.comCareerplanner.com ncda.comncda.com

More reference info …More reference info …

►►Wall Street Journal (Thursday)Wall Street Journal (Thursday)►►Entrepreneur MagazineEntrepreneur Magazine►►Inc. MagazineInc. Magazine►►Franchise MagazinesFranchise Magazines►►All have websitesAll have websites

““ IF IT IS TO IF IT IS TO BE, IT IS UP BE, IT IS UP TO TO MEME…”…”

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Decide if the Decide if the Timing Is Right…Timing Is Right…