| Each option involves some element of risk and | | | | accumulated over the last few years?Also, keep |
| reward. Whichever option you choose, however, | | | | in mind that you may be taking on a heavy load |
| owning your own business offers a chance at | | | | of debt in acquiring the business. A business that |
| more freedom and greater financial rewards. So, | | | | is marginally profitable may not be able to both |
| you're thinking of going into business for yourself. | | | | pay off the debt service on the loan and pay you |
| You have several options available, and all involve | | | | a living wage.FranchisesWhen you buy a franchise, |
| some degree of risk. Do you want to create a | | | | you also buy marketing support, business |
| start-up operation? Perhaps you are planning on | | | | strategy, name recognition, and assistance with |
| buying an existing business. Or, you may be | | | | site location (if it's a retail operation), among other |
| considering the purchase of a franchise | | | | things.However, you also give up some things. |
| operation.Start-upsIf you are planning on building | | | | You will never have the final say in all decisions, |
| your business from the ground up, you are taking | | | | because franchisors typically retain rights to |
| a bigger risk than if you were buying an existing | | | | ensure that your business is run their way. Also, |
| business or a franchise. Existing businesses and | | | | you won't be entitled to all of the profits of your |
| franchises have some operating history that you | | | | business, because franchisors typically take a |
| can use to gauge the likelihood of the success of | | | | percentage as part of their fees. Finally, you may |
| the business. By comparison, with a start-up | | | | be limited in your decision-making processes (e.g., |
| business, you naturally think that you will succeed, | | | | some franchisors require you to buy materials |
| but there are fewer guarantees.Most successful | | | | from their suppliers).If you are thinking of |
| start-ups don't actually begin with a new, | | | | purchasing a franchise, it is very important to |
| innovative product. Instead, they begin with a | | | | thoroughly investigate the company. Remember, |
| proven product or service (start-up owners often | | | | you are doing more than just purchasing a |
| open competing businesses in areas in which they | | | | name--the franchisor is going to be your business |
| are familiar) and become innovative after the new | | | | partner. Make sure that he or she doesn't want |
| venture has generated some level of profit and | | | | only your money and then move on to the next |
| success.Because your start-up has no previous | | | | potential buyer.Franchisors are required to disclose |
| track record (even if you have had success in | | | | lots of information to potential franchisees. Do |
| your field), you will first need to raise enough | | | | your homework. Talk not only to successful |
| financing to make a go of it. Banks or investors | | | | franchisees but also to ones who have failed. If |
| will want to see a plan of attack before they will | | | | several former franchisees tell you that the |
| approve a loan for your start-up. Therefore, your | | | | company didn't fulfill the promises of the franchise |
| first step should be to create a strong business | | | | agreement, beware.Make sure every |
| plan.The business planA well-developed business | | | | representation is made to you in writing before |
| plan serves several useful purposes. It helps to | | | | you purchase. Take notes of everything said to |
| organize thoughts and ideas about how the | | | | you, and have the franchisor sign off on them. |
| business should be developed. It also creates a | | | | That way, you will have a record of what was |
| plan of attack that will help you stay focused. | | | | represented to you if things go wrong.Important |
| And, it will assist you in getting financing. There | | | | Disclosure NoticeThe material contained herein is |
| are several important elements to a well-prepared | | | | not intended to provide specific legal or tax |
| plan:Strong introduction: The cover page, | | | | advice.It provides only broad, general guidelines |
| executive summary (essentially an overview of | | | | and strategies that may be helpful in shaping your |
| the plan), and table of contents will be the first | | | | financial thinking about investment objectives and |
| elements that potential financiers or investors will | | | | risk management.The information that follows is |
| see. If these aren't strong, potential financiers | | | | intended to serve as a basis for further discussion |
| may not take you seriously enough to get to the | | | | with your financial, legal, tax and/or accounting |
| heart of your plan.Business description: Whether | | | | advisors. It is not a substitute for competent |
| you are using the business plan to get financing or | | | | advice from these advisors. The actual application |
| create a focus of how your business should be | | | | of some of these concepts may be the practice |
| run, you need to present a clear vision of what | | | | of law and is the proper responsibility of your |
| your business will be. The description should include | | | | attorney. The application of other concepts may |
| how you want your business to be positioned in | | | | require the guidance of a tax or accounting |
| your industry, what will make your business | | | | advisor. The company or companies listed below |
| unique, the products or services that you will | | | | are not authorized to practice law or to provide |
| provide, and how you plan on pricing within the | | | | legal, tax or accounting advice.Although great |
| industry. Do you want to be the low-cost | | | | effort has been taken to provide accurate data |
| provider, or the high-end specialist? | | | | and explanations, and while the sources are |
| Market positioning: If you want to attract | | | | deemed reliable, the information that follows |
| investors to your business, you need to convince | | | | should not be relied upon for preparing tax returns |
| them that a need in the marketplace exists for | | | | or making investment decisions. This information |
| what you are proposing. This section needs to | | | | has neither been audited by nor verified by the |
| include details on the size of the potential market | | | | company or companies listed below and is |
| for your business, how your business can benefit | | | | therefore not guaranteed by them as to its |
| through sales inside the market, and how you plan | | | | accuracy.This information includes changes made |
| on succeeding against your competitors.Financial | | | | by the Economic Growth and Taxpayer Relief |
| objectives: This is perhaps the most important | | | | Reconciliation Act of 2001 (EGTRRA). Many of |
| part of your business plan. Here, you need to | | | | these changes phase in or out according to |
| convince your potential backers or lenders that | | | | varying schedules and ultimately all of the changes |
| your business will make a sound investment. You'll | | | | made by EGTRRA are scheduled to expire at the |
| want to show that you have evaluated the | | | | end of 2010, unless Congress takes action in the |
| attendant risks and rewards of your proposed | | | | interim.Long-Term Care Insurance material may |
| business. You'll also need to project cash needs | | | | NOT be used with the public in the following |
| and expected income, and present a cash flow | | | | states...Alabama, Arizona, Arkansas, California, |
| statement.Other areas: A good business plan will | | | | Delaware, Florida, Georgia, Idaho, Indiana, Kansas, |
| also cover in some detail your marketing plan, a | | | | Kentucky, Louisiana, Maryland, Michigan, Minnesota, |
| discussion of how you plan on developing products | | | | Montana, New Mexico, North Carolina, Oklahoma, |
| to bring to market (if the business is a | | | | Oregon, South Dakota, Texas, Utah, Vermont, |
| manufacturing concern), and so on.Buying an | | | | Virginia, West Virginia.Securities and Investment |
| existing businessThe obvious advantage to buying | | | | Advisory services offered through: |
| an existing business is that it has a proven track | | | | New England Securities Corporation |
| record of success. But that doesn't mean that | | | | Member NASD, SIPC |
| there are no possible pitfalls that you should | | | | 501 Boylston Street, Boston, Massachusetts, |
| avoid.Perhaps the greatest problem in buying an | | | | 02117Insurance Products Offered through: |
| existing business is that you might not acquire the | | | | New England Life Insurance Company |
| expertise and services of the existing owners, | | | | 501 Boylston Street, Boston, Massachusetts, |
| who have often accumulated goodwill with their | | | | 02117Long Term Care Insurance Offered through: |
| customers or clients. However, when a business is | | | | Metropolitan Life Insurance Company, New York, |
| bought, it is not unusual for the previous owners | | | | NY and other unaffiliated insurers through New |
| to stay on for a period of time to assist with the | | | | England Financial, Boston, MA, an affiliate of |
| transition and to make introductions to clients in | | | | Metropolitan Life Insurance Company.Please note |
| an attempt to transfer some of that | | | | that most long-term care insurance policies contain |
| goodwill.Consult qualified professionals to properly | | | | certain exclusions, limitations, waiting periods, |
| evaluate the information that the owners of the | | | | reduction of benefits and terms for keeping them |
| existing business may provide you. Also, make | | | | in force. Your representative can provide you |
| sure that the reasons why the business is on the | | | | with full details and cost |
| market are true. Is the owner really planning on | | | | information.L06019MJM(exp0108)MLIC-LDHarvey |
| retiring to Florida, or is he or she just trying to | | | | Davis J.D. is a financial advisor with the |
| escape the crushing debt that the business has | | | | Chesapeake Financial Group. |