Buy or Build? Buying Existing Business vs Building New one

March 20, 2011


Many buyers of small business are dismayed by the money they have to pay to buy an existing business. They think that they can build the same business from scratch at a much lower cost. And this is true. To understand why this is the case you need to know the concept of book value of a business versus its market value. Book value refers to the money you can get if you sell all of the business assets in the market. The market value is usually higher than book value and is a result of goodwill that is associated with the existing business. It is this goodwill that the buyers of existing business are paying extra for. The goodwill is a result of all the work that existing owner has done to bring the business to its current level.
While it is true that you can build a business from scratch at a lower cost; it comes with its own set of problems. You have to understand both sides of the buy vs. build equation before making a decision. Below we have highlighted pros and cons of buying an existing business as opposed to building a new one. You can make your decision after studying this and looking at your own situation.
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How to succeed in running absentee business

March 13, 2011


Small business owners run their business absentee for variety of reasons. Some owners are still holding full-time job while starting a business. Others have more locations than they can handle themselves. While still others just don’t want to spend their entire time on the business. Our estimate is that while majority of small businesses are owner operated, there are number of businesses that are run absentee for the reasons mentioned above.
While it is possible to run and succeed in absentee owner business you need to be aware of the problems that arise when you are doing so. Ignoring these problems can lead to deterioration and even disaster for your business. The most common issue in running the business absentee is that you may not be aware of what’s going on with your business or at least not to the same degree as when you are present 24×7. Even if you come to know about the issues it may be too late to act on. The issues can surface in all areas of the business ranging from operations, quality, purchasing and customer service.
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Improve your Sales with Up Selling

March 6, 2011


“Would you like fries with that?” – We have all heard this while ordering burger at a fast food place. How many times have you answered it with – “sure”? Well, this is the power of up selling. In its simplest form, it is just a matter of asking customers if they want to add more items to their order. In a more subtle form, it could be something like placing a complementary item to the one that you intend to purchase in a grocery store and enticing you to buy it.
If you are not taking advantage of up selling and cross selling opportunity in your business you are probably losing 20-30% of potential sales. Some companies have really mastered the techniques of up selling by making customers buy additional items at a high price. For example, Ford has increased the average selling price of its cars by making customers want and pay for the extra options in their basic cars. When Apple introduced its next generation of iPad on March 3 it also showed a screen cover that will be sold for $39 for basic model and $69 for leather version. Can you imagine what their profit margin is on these items?
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Do you have what it takes to be Small Business Owner?

March 2, 2011


Small business owners are a special breed. They don’t like to sit still or take orders from others. They also don’t like to stop even when they have become successful or when they have met with failure. That’s why the term serial entrepreneurs – once an entrepreneur; always an entrepreneur.
Many people who have held job for their life dream of owning a small business – either out of frustration with their current job or because they have lost their job and can’t find one in this difficult economy. They think that just because they have a strong desire to be a small business owner they will succeed. While having a strong desire is a good start; it takes more than that to be a successful business owner. Our experience has shown that the success in small business is dependent on a combination of factors including heredity, upbringing, determination, working style and external support.
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How to plan for employees leaving without warning

February 28, 2011


For small business owners employee attrition is a fact of life. It is estimated that the annual attrition runs as high as 100% for some types of small businesses; particularly the ones that employ hourly workers! This means that you will not have the same set of employees at the end of the year as the ones you started with. This kind of turnover not only increases your cost in the form of hiring and training; but it may also reduce sales by affecting the quality and customer service.
While you can try to keep your employees motivated and use these techniques reduce turnover; the fact remains that the employee turnover will remain high if you are in type of business that employs hourly workers. My brother, who owns a coffee shop, complains that he always fears a call from an employee who will call him to say he is not going to show up for work because he has found another job. It always happens when he is not able to find any replacement on a short notice forcing him to rush to the business from wherever he is.
While you will not be able to prevent your employees from leaving on a short notice; the next step is to try to mitigate the impact on your business as a result by taking certain steps beforehand. Below we have outlined some steps you can undertake that will help you take care of business even when your employees leave suddenly.
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Proven Techniques to Deal with Customer Complaints

February 21, 2011


For small business owners (and for large ones too) customer complaints is a fact of life. Every business runs into few customers who are not happy with the service or product or something else. The complaints in and of themselves are not going to hurt your business much. It is how you deal with them that determines how they will impact your future business.
We have heard many business owners say – “but I know that this customer is wrong. He/she is just trying to get free stuff or get discount by complaining and making a scene.” And they may be right; but does it really matter who is right or who is wrong? At the end of the day, it is about who has the power to hurt your future business. It is these customers who are complaining – genuine or sham.
So, is there anything you, as a small business owner, can do to alleviate this problem? Obviously, you cannot stop customers from complaining; although you can reduce the number of genuine complaints by providing excellent products and services. Based on our experience in running multiple restaurants we have come up with these guidelines to deal with customer complaints and mitigate their impact on the business.
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Checklist to Understand Marketing Benefits of Franchise

January 31, 2011

In the post about benefits of buying a franchise versus independent business we argued that one of the primary benefits provided by franchise is better marketing at a lower cost. By leveraging their size and expertise a franchise can create better brand and improve sales for all franchisees. Subway positioned itself as the Diet Sandwich Shop in the minds of all Americans by running the “Jared” campaign for number of years.
However, not all franchises do such a good job of marketing. A number of them waste their and franchisees’ money by spending on frivolous, useless marketing activities. That’s why it is important to understand the value provided by franchise in terms of marketing and compare it against the investment you have to make as a franchisee – in other words the return on your marketing spend.
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Benefits of Buying a Franchise versus Independent Business

January 26, 2011

As we mentioned in the previous post on myths and realities of franchising franchising model helps those who want to get into small business; but do not have prior experience or do not want to start from scratch. These people like the fact that buying a franchise versus independent business will reduce the risk of failure. At the same time, they also question the value provided by franchisor for the amount of money they have to pay to them in terms of initial franchise fee as well as ongoing royalty.
As with any business transaction, it is important that you understand what you are getting in return for the money paid to the franchisor. While franchisor does provide benefits in exchange for the fees they receive; not all of them are equal. In addition, different franchises provide value in different areas depending on their strengths and strategy. You should know why you are buying one franchise over others and set proper expectations before making decision.
In our experience, franchises provide value in 4 categories listed below:
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5 Common Myths and Realities of Franchising

January 9, 2011


The franchising model provides a springboard to many would-be entrepreneurs who dream of owning their business; but do not have experience or time needed to take care of myriad aspects of running a small business.
While franchising does provide the needed support and tools for running the business; many people wrongly believe that because they are going in the franchising business they can operate the business without much effort on their part. After all, the franchise is supposed to take care of everything in exchange for getting the monthly royalty payments, right? Nothing could be further from truth.
In this post, we aim to dispel this and other myths held by entrepreneurs. You should also look at previous blog posts that discuss qualities to look for in a good franchise as well as signs that show the franchise will be successful.
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Best Ways to deal with an Irate Customer

November 21, 2010


Post from Guest Contributor Chris Blanton, editor of Ingenious Business Guide.
Do you remember the last time you were frustrated while making a purchase? Maybe you were talking with an unintelligible company’s customer service rep on the telephone. Or maybe a retail clerk was arguing with you. Perhaps a returns department refused your refund because you had lost the receipt. Regardless why you were upset, you wanted two things: someone to solve the problem, and a sincere apology for being disrespected.
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Filed Under: Customers, Management, Operations