Wondering how to become a business owner? There’s more than one way to reach this goal. In this article, we’ll help you explore three popular pathways and find the option that’s right for you.
Tell me about the three pathways to become a business owner.
Most business owners choose one of three paths:
- Start a business from scratch, either running with a brand-new idea or borrowing practices from other successful businesses.
- Start a franchise unit, buying into a program that’s been optimized to help new owners succeed.
- Buy an existing business that’s well known in its market and profitable.
Let’s explore each of these options.
Let’s talk about starting a business from scratch.
When most people think of “becoming a business owner,” this is the option that comes to mind. Here, a prospective business owner develops an idea, sizes up the market, secures the resources that are needed, and spends time implementing a plan.
Starting a business is risky, but it can be a great option for people who feel confident about their fresh idea, new take on an existing idea, or introduction of an existing idea to a new market. It’s also a great choice for people wanting to stay in control over every aspect of a business. Owners choosing other pathways may need to follow mandated protocols or existing practices to ensure a business’s success, but those who start a business have full authority over every aspect, from selecting a name and logo for a business to choosing who they want to serve.
Of course, this responsibility can be a lot to bear, and entrepreneurs who choose this path will take on many challenges, including working through unfamiliar legal requirements, deliberating on a business model, and building a following. They will likely invest far more hours into the early stages than they might by buying a franchise unit or an already established business. And because they’re operating without a roadmap, it can be easy to make mistakes along the way.
Still, this path can be a rewarding one if you have a strong idea and the passion and persistence you need to pursue it.
What do I need to succeed with this path?
Most successful entrepreneurs have the following attributes:
- A great idea with a verifiable market
- Industry and market knowledge
- Managerial knowhow
- Financial resources to cover some or all of the costs of startup
- Determination
- Agility to pivot when and how it’s needed
- Good risk tolerance
How can I learn more about starting my own business?
Read our guide, Where to Start When Starting Your Business, to decide whether this is the path you want to take in becoming a business owner.
Ok. What about opening a franchise unit?
Franchise ownership is another popular option for a person who plans on becoming a business owner. Here, an owner will pay a franchise fee (and ongoing royalty fees) and gain access to a successful enterprise’s name, trademark, systems, and practices.
Many opt for franchise ownership because they believe the system they’re buying into sets them up for success. In many cases, this is true. Franchisors put in the upfront work that’s required to find a market, develop winning products or services, and build brand awareness, and after inviting others to open units, they provide ongoing resources and support to help owners prosper.
Franchises can fail, of course, so this isn’t a risk-free option. However, franchise ownership is often less risky than startup, and further, profitability tends to occur faster.
Who succeeds as a franchise unit owner?
Successful franchise unit owners have many of the same qualities as entrepreneurs. They have:
- Industry and market knowledge
- Managerial knowhow
- Financial resources to cover some or all of the costs of startup
- Determination
- Good risk tolerance
These qualities are important, but franchise unit owners can lean on their franchise organization for each of these items. Franchisors know their industry and market and design their businesses to thrive within them. They offer training. Many even provide franchise financing to help new owners cover some of the costs of startup.
There are a few attributes that set franchise unit owners apart from startup entrepreneurs:
- Many are more risk-averse, preferring proven systems and structures over experimentation.
- They are more willing to follow guidance and standards.
- They are more willing to give up some degree of control over all parts of their business.
How can I learn more about franchise ownership?
Read our guides, Nine Tasks to Take on Before Buying a Franchise and Assess Your Skills, Interests, and Goals Before Searching for a Franchise Opportunity, to explore this path.
What about buying an established business?
This third path is growing in popularity. Many aspiring business owners are buying businesses that are already up-and-running, have a strong customer base, and are successful in their markets.
This option tends to be the most expensive, but it’s a favorite among risk-conscious owners who want to buy into a profitable business and gain access to established systems, loyal customers, good vendor relationships, and knowledgeable employees.
Owners choosing this path can bypass many of the pains of startup, though this path isn’t without challenges. People who become owners through acquisition must invest time into sourcing businesses, raising capital, and learning the practices, policies, and strategies of the business they buy. They may also need to work through the challenges of changing legacy systems, navigating the pains of the transition, and charting new paths to success.
Could I succeed with this path?
Business owners who succeed with this path often have the same attributes as startup entrepreneurs:
- Industry and market knowledge
- Managerial knowhow
- Financial resources to cover some or all of the costs of the acquisition
- Determination
- Agility to pivot when and how it’s needed
- Good risk tolerance
What sets them apart is a willingness to see others’ good ideas through and decide whether to adhere to winning practices or experiment to find new levels of success.
How can I learn more about buying a business?
Read our guide, The Fundamentals of Buying a Business, to learn more about this option.
What’s next?
Once you decide on a pathway, be sure to sign up for your free owner’s portal. Your portal will provide you with a customized checklist to help you work through the steps of starting a business or buying a franchise unit or existing operation. It will also help you connect with the people and resources you’ll need along the way.
