CONSIDERING THE PURCHASE OF A FRANCHISE: ARE YOU READY FOR THE CHALLENGE?
By Andrew J. Sherman, Esq.

Before choosing a franchise or a business opportunity, you must understand yourself and decide what you want to accomplish by starting your own business. An honest self-evaluation can be difficult for anyone, but it is especially tough if you are on the brink of what you hope is a promising opportunity to earn much needed income. Everyone would like to have the right business aptitude, managerial sills, education and relevant work experience to be successful, but in order to prepare yourself for the challenges ahead, it is vital to be as objective as possible in assessing yourself and the business opportunities you want to consider.

The key to this process is to be honest and realistic in your evaluation of your interests, strengths, and weaknesses. Many entrepreneurs have a tendency to give themselves an overly favorable evaluation of their strengths than would an independent third party. Others overestimate the need for a new product or service in a given market because they are blinded by their own enthusiasm for starting a new business venture. You are only fooling and hurting yourself and your family if you convince yourself that you have a particular strength or a talent in a particular industry when you are really engaging in wishful thinking. Similarly, you only create stumbling blocks in the way of your long-term success if you consider going into business to sell a new product or service when objective research shows you there is no market, or that the market is already oversaturated.

Of course, an entrepreneurial spirit and a positive mental attitude are still critical components in starting a new business. We all need to have a little bit of the "Little Engine That Could" mentality to succeed in business. But you must know that a small train cannot possibly get up a hill without any coal or a conductor, nor would it want to go up a hill if there are no passengers or freight to carry. Be objective as you answer the questions in the pages that follow.

Understand Yourself

Describe your five strongest and weakest points. How will these assets and liabilities affect your ability to start and run a business? Do you have any specific weaknesses that could be an impediment to successfully running a business? For example, do you have a short temper or find it very difficult to speak before a group?

Are you emotionally and financially prepared to take risks? Can you deal with rejection? How will you feel if the first twenty potential customers slam the door in your face? How will you feed your family if the first fifty customers choose not to buy your product or service?

What is your motivation for going into business? Are you willing to make the necessary sacrifices to start and own a business? Are you willing to work long hours, miss out on time with family and friends, give up leisure time activities and hobbies? Will you make the time to commit yourself to community service projects and public- relations activities, eat leftovers five nights in a row, or trade in your European sports car for a used jalopy if necessary?

What are your financial needs? Where are you now and where would you like to be? What are your realistic expectations about what you will earn from this business opportunity? On what basis have you arrived at these projections? What funds are immediately available to acquire the business and get it running? What additional funds will be required? Where will you get the money?

Can you manage and motivate others? Have you displayed leadership qualities? How many employees will this business opportunity require? Do you feel comfortable in delegating key tasks and positions of responsibility to others? Will you be able to resist the impulse to second guess them and interfere with their ability to work effectively?

How strong are your organizational and decision-making skills? Do you consider yourself to be well organized in your management of day-to-day affairs or are you constantly forgetting about things? Are you typically early or late for meetings and appointments? Are you prepared for them? Are you good at making plans, sticking to them, and then adjusting them when necessary?

How would you describe yourself? Words typically associated with successful entrepreneurs include hard-working, ambitious, energetic, perseverant, enthusiastic, and well-liked. Do you fit the bill? Or do you consider yourself a bit lazy, introverted, or lacking emotional and physical stamina? How will your own character traits and health affect your ability to overcome adversity, meet challenges, lead others, and face disappointments?

Who do you rely upon for support and encouragement? Do your friends and family agree with your assessment of the particular business opportunity? Do you have time and resources to consult with an accountant or business attorney? Do you have a business mentor or role model? Can you consult with him or her about the business opportunity?

Are you creative? At work or at home, are you the one who comes up with new ideas? Are you always looking to improve or strengthen the way things are done or do you take things for granted? Do you have a "If it ain't broke, don't fix it" mentality or are you uncomfortable with the status quo and always try to make things better?

Understand Your Marketplace

Once you decide that owning your own business is right for you, the next critical task is to make sure that you've selected the right type of business. This involves matching your skills, strengths, and weaknesses with the types of franchises which are offered in this industry. For example, if you've determined that "people skills" are not your greatest asset, then you may want to select a business that requires only a few employees or a business that targets a smaller number of individual customers instead of hundreds of retail consumers. Once you've selected the type of business, it is critical to make sure that your marketplace is ready and demands the particular product or service. The following questions will help you analyze your target marketplace.

Why do you feel that there is a demand for your intended product or service in your targeted marketplace? Is this based primarily on wishful thinking or can you back it up with actual market research? On what data did you base your research? Did it come from reliable sources such as industry groups, banks, chambers of commerce, and government agencies?

Who are the direct competitors in your targeted marketplace? What about indirect competitors? What are their track records? How will you distinguish your product or service from those of your competitors? What makes yours better or different? Why would a typical consumer choose your company over a competitor? Will you be able to offer the product or service at a competitive price?

What is your targeted market? How big is it? On what basis have you defined this market? What changes in competition, demographics, or technology have influenced demand in your market? What future trends will influence demand in your market? What type of site or location does this product or service require? Are these types of sites available in your targeted market at a competitive price?

Who is your targeted customer? How will you reach them? What factors influence their decision to purchase the product or service that you offer?

How strong is the product or service that you intend to offer? Is it considered high quality? Or are you offering a lower-quality product or service in exchange for certain price benefits? Is the key value of your product or service based on a proprietary formula or trademark? How easily can it be duplicated by a competitor? Is your product or service "state-of-the-art" or could it soon become obsolete? Is the product subject to a sharp change in consumer demand, such as a fad or gimmick product? Could the product be considered seasonal or a luxury item? Is the offer and sale of this product or service subject to any special regulatory licensing, such as alcohol, tobacco, or firearms?