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Elnora Bunton

United States

What Are the Various Paths to Small Business Ownership?

December 15, 2015

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Not all business owners start their ventures from the ground up. You could buy an existing company, secure franchise rights, license or purchase critical technology or methods, inherit a company, or be hired as a manager. However, there are pros and cons to each approach, and it will be worthwhile to give thought to each option.

Securing Franchise Rights

A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name or advertising symbol and an individual or group seeking to use that identification in a business. For many people who want to own and operate a business, it is worthwhile to consider franchising as a path to business ownership.

Buying an Existing Business

The purchase of a business, or acquisition, can be a good way to jumpstart entry into small business ownership. There is both an art and a science to buying an existing business. The challenge is to do a complete, in-depth analysis of the opportunity, just as you would for a start-up, with the added dimension of taking into account an existing history, whether for better or worse.

Be wary of owners whose businesses seem to be too good to be true or who are overly eager to sell. Be thorough, whether you are buying an entire firm, a customer list, or some or all assets and especially if you are taking on some or all debt. Done well, buying a business can be the starting point for success. On the other hand, if done poorly, buying a business can be more challenging and problematic than starting a new venture.

Licensing Technology

One way to potentially shorten the product-development cycle and to access innovative technology is to identify and license that technology—that is, to enter into a contract to use it without purchasing the rights to own it. Whether you acquire such rights through a university, state economic development office, federal agency such as NASA, or an individual scientist/inventor, you can create a business based on technology transfer. Or, you may find that it makes more sense to purchase the rights outright, or over time.

The MBA team of Bruce Black and Matt Ferris, from the University of Georgia, developed a business plan that garnered numerous competitive awards for the KidSmart Vocal Smoke Detector, someone else’s creation that they arranged to bring to market. The product is now available in major retail stores and on the Internet, through Signal One, the successor company. Before securing franchise rights, purchasing a business, or licensing technology, be certain to do your research thoroughly to understand what you are and are not buying, and what your ongoing obligations—financial, operational, legal, and reporting—will be. Because these transactions are complex and can have significant financial and personal implications, it is important to invest in qualified legal and financial counsel before signing any agreements of this kind.

 

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