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Under
ideal conditions, business opportunities are a good, low-investment way to
get into business with minimum risk and a good chance for success. But
nothing in this world is perfect, so here are some problems that can be
expected:
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Poor
site selection. The majority of business opportunities are
consumer-oriented retail operations which rely on good location,
visibility and easy access to the establishment. Most buyers of business
opportunities casually accept the locations chosen for them. DON'T! Look
it over thoroughly yourself. You might even hire an outside marketing
consultant to evaluate and possibly argue with the parent company's
choice. Having a better locations could literally mean millions of
dollars in profit over the course of 20 years.
-
Lack
of ongoing support. There is usually no requirement for the business
opportunity seller to offer ongoing support of any kind. If the seller
decides not to supply information or guidelines that could help you once
you're in operation, you may not have much recourse available to you.
-
Exclusivity
clauses. Are you restricted to selling only the manufacturer's
merchandise? If this is the case and you deviate for any reason
whatsoever, you run the risk of the licensor canceling the agreement. If
you do buy from other sources, it will be very hard to hide—most
parent companies will require you to open your books for examination at
predesignated periods of time. Any irregularities will be spotted at
these times. Most smart buyers of business opportunities will negotiate
the point in the agreement stipulating sources of supply in case product
quality is inconsistent.
-
Parent—company
bankruptcy. Another pitfall is the possibility of the parent company
overextending itself and going bankrupt. While this is not as serious in
a business opportunity as it would be in a franchise, you still run the
risk of losing the business because your property contracts may have
been financed through the parent company.
You
should carefully investigate any business opportunity you're considering.
Get a list of operators from the parent company and call them. Have a lawyer
look over any agreement drafted by the parent company. Make sure you receive
a disclosure statement. Then carefully evaluate the licensor. Don't let
anyone hurry you. Make sure a responsible company backs the business
opportunity.
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