Alternatives to Starting a Business From Scratch

Buying an existing business or franchising are two great options to get up and running quickly.

by Stephanie Vozza
updated May 02, 2022 ·  3min read

If you've ever considered starting your own business, you're not alone. According to the Inside Small Business Survey from The UPS Store, 65% of Americans dream of being their own boss. However, making that dream a reality can be daunting. Starting a business can involve raising funds, creating marketable products and services, securing customers, and much more. The prospect keeps a lot of would-be entrepreneurs on the sidelines.

However, it's possible to get into business without building it from the ground up. Consider these two options that can get you up and running fast and without much risk.

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Buy an Existing Businesses

Buying an existing business is the least risky method of becoming a business owner, says John R. Allen III, managing partner of Allen Business Advisors, a business brokerage firm.

"If you buy a business, there are customers and clients, systems and processes in place, documented financial performance that will allow a new owner to predict future income, and the future former owner is a mentor to help the new owner grow the business," he says. "Depending on the type of business purchased and the complexity, the future former owner will have an employment agreement with the new owner."

Lisa Kipps-Brown, author of Boomer Cashout: Increase Your Business's Value & Marketability to Sell for Retirement, encourages younger entrepreneurs to buy existing businesses.

"Buying from a seasoned owner gives you the opportunity to learn from their decades of experience, taking a shortcut in the school of life," she says. "Most existing businesses are a big part of their local community and have considerable goodwill. They're not just businesses; they're part of people's lives and a place where memories are built."

New owners can put their personal stamp on the business, as well. "If an existing business is viable but isn't as technologically advanced as you would like, you have the opportunity to take the existing infrastructure and integrate technology as you see fit," Kipps-Brown says.

As many baby boomers approach retirement age, Kipps-Brown predicts a "gray tsunami" of businesses coming up for sale.

"They may be willing to do things like self-finance, work with you for a period of time, and remain on call as advisers," she says.

Buy a Franchise

The second option is franchising. Many well-known brands are franchises, such as McDonald's, Taco Bell, The UPS Store, Planet Fitness, and Ace Hardware.

"A franchise is a business with training wheels," says Tom Scarda, CEO and founder of The Franchise Academy, a franchise coaching firm. "The franchise company holds the owner's hand and teaches the franchisee best practices from day one until the owner sells. The owner will keep almost 100% of the proceeds from the sale of the business and, of course, daily income while it operates."

This form of buying a business comes with fees. An up-front franchise fee is paid when the prospective franchise owner buys the license. "It is like paying tuition upfront," says Scarda. "A franchise owner pays for the training, know-how, and best practices within the industry it serves."

Franchise owners also typically pay ongoing royalties, which are usually a percentage of income.

"However, much of those royalties go toward business expenses that would need to be paid for by any business, franchised or not," Scarda says. "Some of the royalties pay for public relations, marketing, branding, demographic studies, and research and development at a much better price than a private entrepreneur would be able to pay. Some concepts also have call centers and customer-facing apps that a typical mom-and-pop startup couldn't afford."

"A job is like renting an apartment; it's temporary and out of your control," Scarda says. "Owning a business is like owning a home. It's expensive and comes with responsibilities regarding maintenance, repair, and upkeep. However, it's yours. You control it and hopefully will sell it for a lot more money than you paid for it."

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Stephanie Vozza

About the Author

Stephanie Vozza

Stephanie Vozza is an experienced writer who specializes in business, finance, and technology. She has been a regular co… Read more

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