Home > For Businesses > Sanlam Cobalt > Sanlam Cobalt for Start-Ups > Before You Start > What are your options

Choosing an avenue for your independent enterprise largely depends on your resources. Each of the three options below has its own unique advantages and should be thoroughly considered before you embark on your dream business.

Starting your own business

Following this route can give one a tremendous sense of accomplishment and ownership. You can set it up precisely the way you want it, and you would not have to work inside of existing confines.

However, you should recognise that you're not known and have no track record. Furthermore, establishing a new customer and supplier base could prove rather tedious.

You may also choose the wrong location, product range and pricing. With new, inexperienced staff, it may take a while to get the mix right and reach acceptable customer service and productivity levels. All while the clock is ticking and rentals, staff and suppliers need to be paid.

Can you handle the pressure? Do you have sufficient cash flow to tide you over? If not, deal with your weaknesses first before taking the plunge!

Buying an existing business 

If you have the financial means, buying an existing business makes a lot of sense. It has a track record and hence, a reasonable indication of its future viability. Further, the business would have an existing infrastructure, business processes and trained staff, and moreover, a clearly identified market. So you could be off to a flying start.

However, the existing state of affairs could work against you. You may be up against split loyalties from staff, suppliers and even customers. This could seriously derail your best efforts, especially if you want to make changes to the status quo.

So when does it make sense to buy an existing business?

• When you don't have an idea but discover one in an existing business.
• When you have more money than time.
• When you want to grow and the selling business owner 'wants out' because he or she is close to retirement, emigrating or moving on to something different.

Buying a franchise

The beauty of buying a franchise is that you’re buying into a proven system for running a business and making a profit off an existing and established brand name.

This means you can concentrate on being a manager, and not try to be an advertising strategist or sales expert at the same time. You further don’t have to negotiate for lower stock prices. That you leave to the franchisor.

Typically small business owners operate in a vacuum, without support, but franchises have changed all that as you can share with and learn from like-minded other franchisees, and enjoy the support head office gives you.

At the same time, this primary benefit could also be a drawback. It means less freedom, the obligatory sharing of financial information and the requirement to conform to uniform operating procedures.

It is also more expensive. You’re about to buy something so good it has been franchised. It’s going to cost more, and you’re required to pay and keep paying for the privilege by making annual royalty payments to the franchisor.

In summary then, the franchise option works best for individuals who work well in a team environment and have limited business and industry background.