Pro’s and Con’s of Business Opportunities

The concept of a business opportunity might not be completely understood, simply because it can apply to so many different situations. For the purpose of our discussion here, we will not be talking about franchise opportunities. Otherwise, almost anything goes–from distributorships to vending machine routes, from network marketing to dealerships. Business opportunities can be online or be located in the real world. In general, a business opportunity is the sale or lease of a product, service or equipment that enables you to start a business.

Business opportunities usually involve a product and they may have a location, although the online world is quickly changing that. The assumption with a business opportunity is that there is a market for the product or service and there is the potential for profit. Initial fees for taking advantage of a business opportunity vary and there may be a buy-back or guarantee provision. Business opportunities usually come with some sort of marketing program as well.

A “business opportunity” doesn’t normally refer to the one-off sale of an independent business. Business opportunities normally consist of a system or set of procedures that can be sold to more than one buyer in more than one location. With the sale of an independent business, they are usually no continuing obligations between the seller and the buyer. The buyer can do anything they want with the business they’ve bought, and there’s no requirement for a continuing relationship with the seller.

There are many advantages and benefits connected with business opportunities. They normally have a lower initial fee and lower startup costs than a franchise. Business opportunities are normally based on a proven system or product, so you can profit from the experience of others. There may be a training program connected with the business opportunity and longer-term business counseling may be available as well. You benefit from the buying power of a larger company and you can often take advantage of cooperative promotional activities and advertising.

But the world of business opportunities is not always perfect. The company offering the opportunity may not always have your best interests in mind. There may be a lack of support at some times. Exclusivity clauses (meaning you can sell their product and no others) may hinder your ability to compete in the marketplace. It’s not unheard of for parent companies to go broke or declare bankruptcy. The bottom line? Anytime you consider taking advantage of a new business opportunity, it’s your responsibility (not someone else’s) to diligently evaluate both the company and yourself.

First of all, are you truly ready to take on a business opportunity? In addition to having the financial freedom to take a chance, do you really have the passion and excitement to put into a new business opportunity? And what about time? Do you have enough time freely available to devote to the success of this business opportunity?

Successfully starting up a new business requires complete knowledge of your product or service. If the company is not willing to immediately and cheerfully provide that knowledge, then you should quickly back away from this particular opportunity. Do some market research of your own. Don’t take the company’s word for it that a rabid demand exists for their particular product.

Investigate the company’s record of past success and try to interview someone who’s currently involved with the business opportunity. Has the company lived up to its promises and fulfilled its obligations?

What sort of income claims are connected with this business opportunity? You should look for assurances of reasonable income, but at the same time there should be no limit on future income. Promises of fast and easy riches should be a warning for you to stay away. How many years has the company offering the opportunity been in business? What sort of reputation do they have? Are their ethics and standards compatible with yours?

There’s no shortage of business opportunities available. It’s a fairly simple matter to find something that appeals to your interests and fits within your startup budget. But don’t allow yourself to be rushed into any arrangement. True business opportunities based on proven models will have no trouble waiting for your careful consideration.

Business Opportunities – 9 Things to Watch Out For

If you are considering striking out and starting a new business, you have probably been investigating what are known as “business opportunities”. A business opportunity is usually a complete package that contains a product or line of products, and a marketing strategy for selling that product.

Any business opportunity worth considering will either have a track record that you can investigate and evaluate, or it will have a clear statement of the plan, the potential, and the up-front costs. Before investing any time or money in a specific business opportunity there are some things you should consider. Here are some of the more important ones:

  • How long has the business opportunity been in business? – Before investing time and money in marketing a business opportunity it is important to determine how long that business opportunity has been operating. If it is a new concept that has not been proven in the marketplace, you have no assurance that it will even work.
  • Does the company have a fixed address and phone number? – This may seem obvious to you, but the fact is, thousands of “companies” operate with nothing more than a website and an email address. Many of them are here today and gone tomorrow. Make sure the business you intend to deal with has a fixed address, physical location, and established phone number.
  • Does the business opportunity have some successful members you can talk to? – Most business opportunities will show you “testimonials”, but these are often untrustworthy. They could even be completely fabricated. Ask the owner of the business opportunity for names of real people you can talk to. Call them on the telephone and ask them to share their experiences with the program. This will not only provide you with valuable first-hand information about the program, but it will give you a list of advisors who many be happy to help you along the way.
  • How much initial investment is required? – In many cases a proven business opportunity with a successful track record will involve some kind of initial investment. This could involve an initial amount of product inventory, a program subscription fee, or possibly a piece of equipment required to produce or finish the product. You should not assume that a business opportunity that is free to join is a better investment. Usually a free-to-join business opportunity will involve other costs such as marketing and advertising fees. Nobody gives away “opportunities” for free. What you have to determine is whether a specific business opportunity has a successful track record, is managed by honest people, and offers you a realistic chance of actually making some money. These are the things you must weigh against the entry costs.
  • What is the realistic income potential of the business? – Have a careful look at the numbers and projections provided by the business opportunity. Then talk with actual members who are using the program to determine if they have been able to turn those numbers into reality.
  • Are there extra fees such as yearly or monthly subscription fees, shipping costs, or minimum purchase requirements? – Make sure to get a detailed list of all the fees involved in operating the new business. These things may not seem significant now, but they can easily eat into your profits later.
  • Who controls the money? – When you generate sales for the business opportunity what assurance do you have that you will get your share of the profits? This is the primary reason not to deal with “fly by night” outfits that have no track record. Again, the best way to get an accurate reading on this is to talk with people already using the program.
  • Does the business opportunity supply marketing materials and person-to-person mentoring? – One of the most difficult parts of starting a new business is “learning the ropes”. It can be extremely helpful to have advisors who have first hand experience in making the program work. The same goes for marketing materials. You will have enough to do without having to create brochures, ads, and newsletters for your new business.
  • How much control of your new business will you have? – Be clear on who owns the business, and who controls the way it is developed and marketed. You may want to diversify your product offerings in order to avoid being at the mercy of “head office”. Remember that you are trying to create a business that has long term value. This will involve considerable investment of time and energy on your part. You don’t want your business to be completely dependent on the stability and integrity of a single supplier.

The ideal business opportunity is one that is offered by a stable company with a proven track record. The business opportunity should require low initial investment and have high profit potential both in the short term and in the long term. It should allow you to build a profitable business of your own that will be a source of income far into the future.

Business Loan Strategies to Buy a Business Opportunity

When buying a business opportunity that does not include commercial property, borrowers should realize that business loan options will be significantly different when compared to a business purchase that can be acquired with a commercial property loan. This problematic situation occurs because of the normal absence of commercial real estate as collateral for the business financing when buying a business opportunity. In terms of arranging the business loan, efforts to buy a business opportunity are almost always described by commercial borrowers as excessively confusing and difficult.

The comments and suggestions in this report reflect business financing conditions that are frequently offered by substantial lenders willing to provide a business loan to buy a business opportunity throughout most of the United States. There are likely to be circumstances in which a seller will privately fund the acquisition of a business opportunity, and it is not our intent to address those business loan possibilities in this report.

BUSINESS OPPORTUNITY BUSINESS LOAN STRATEGIES:

Buying a Business Opportunity – Length of Business Financing to Anticipate

Business financing conditions to buy a business opportunity will frequently involve a reduced amortization period compared to commercial mortgage financing. A maximum term of ten years is typical, and the business loan is likely to require a commercial lease equal to the length of the loan.

BUSINESS OPPORTUNITY BUSINESS LOAN STRATEGIES:

Expected Interest Rate Costs for Buying a Business Opportunity

The likely range to buy a business opportunity is 11 to 12 percent in the present commercial loan interest rate circumstances. This is a reasonable level for business opportunity borrowing since it is not unusual for a commercial real estate loan to be in the 10-11 percent area. Because of the lack of commercial property for lender collateral in a small business opportunity transaction, the cost of a business loan to acquire a business is routinely higher than the cost of a commercial property loan.

BUSINESS OPPORTUNITY BUSINESS LOAN STRATEGIES:

Down Payment Expectations to Buy a Business Opportunity

A typical down payment for business financing to buy a business opportunity is 20 to 25 percent depending on the type of business and other relevant issues. Some financing from the seller will be viewed as helpful by a commercial lender, and seller financing might also decrease the business opportunity down payment requirement.

BUSINESS OPPORTUNITY BUSINESS LOAN STRATEGIES:

Refinancing Alternatives After Buying a Business Opportunity

A critical commercial loan term to expect when acquiring a business opportunity is that refinancing business opportunity financing will routinely be more problematic than the acquisition business loan. There are presently a few business financing programs being developed that are likely to improve future business refinancing alternatives. It is of critical importance to arrange the best terms when buying the business and not rely upon business opportunity refinancing possibilities until these new commercial financing options are finalized.

BUSINESS OPPORTUNITY BUSINESS LOAN STRATEGIES:

Buying a Business Opportunity – Lenders to Avoid

The selection of a commercial lender might be the most important phase of the business financing process for buying a business. An equally important task is avoiding lenders that are unable to finalize a commercial loan for buying a business.

By eliminating such problem lenders, business borrowers will also be in a better position to avoid many other business loan problems typically experienced when buying a business. The proactive approach to avoid problem lenders can have dual benefits because it will contribute to both the long-term financial condition of the business being acquired and the ultimate success of the commercial loan process.

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