Business Opportunities

Advantages & Disadvantages of Business Opportunities

When considering life as an entrepreneur, it is important to understand the differences between a franchise, business opportunity and a start-up business. There are, of course, advantages and disadvantages to each style of business. In this article we will discuss the advantages and disadvantages of business opportunities and the difference between a franchise and business opportunity.

 

Advantages of Business Opportunities

Advantages of Business Opportunities
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• Typically the initial start-up costs are less than establishing a franchise. Upfront fees are lower and there usually are not ongoing royalties to pay to the seller.
• Business opportunities afford a proven system of operation and products and services.
• Financing is many times readily obtained through the leverage of the parent company.
• Comprehensive training programs are usually provided, making the learning curve much easier and shorter.
• Site selection is often chosen by experts at the parent company, usually providing the best location for marketing the products.
• Marketing and advertising are usually a joint effort between the opportunity provider and the purchaser. This can decrease dramatically promotional expense for the licensee.
• Purchasing power is a great advantage. The larger parent company can often get better deals by buying equipment and materials in bigger quantities.

Disadvantages of Business Opportunities

Disadvantages of Business Opportunities
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• Since the purchaser usually does not pay any ongoing fees to the seller, there is typically no incentive for ongoing support to be provided. If the seller runs into problems, he/she is usually on his/her own.
• Exclusivity clauses can put limits on what a licensee is allowed to sell. If the entrepreneur deviates from the clause, the licensor can cancel the agreement.
• Even though sites are usually selected by experts within the parent companies, some poor choices can be made. It is important for the licensee to research the area themselves for marketability of the products/services being offered.
• If the parent-company would go bankrupt, there is the risk of the licensees losing their businesses as well, although the risk would be greater if it were a franchise.

Any type of business opportunity should be carefully researched and investigated before taking the plunge in order to minimize the risk. A potential entrepreneur must also carefully evaluate his/her personality traits and family situation to see what sort of business would best suit his/her needs.

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