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One of the worst aspects of any depression has to be the numbers of firms that don’t survive. In a market such as the one the world has experienced over the last 12 months a number of factors have affected the capacity of firm to continue to operate.
Firstly and most clear, the downturn in consumer spending, which has produced increased competition in the marketplace. Only the most efficient companies carry on in this situation.
Secondly the shortage of access to money and investment. When firms undergo cash flow or revenue issues then they rely on the Banks to give funds to see them through. As we all know those funds have not been accessible.
The net effect of these factors is that companies are failing. When businesses fail they leave gaps in the market; demand for a product or service has not automatically lowered just because a organisation providing it has ceased trading. To start a new organisation in a recession simply re-providing a product or service relies on funds or access to funds. If a new start up is funded by the owners then there is inherent personal risk in the possible failure of that organisation, and as we have already recognised help from the banks is unlikely to be immenent.
The other way of breaking into a market sector is through the acquisition of a Franchise Opportunity. Where there is a franchise for sale, there is the chance to get into business with less risk.
Even where there is a Franchise For Sale there is some risk as the success of the business will depend on the skills of the Franchise operator. That said the investment is preset and obvious and the market opportunities should be apparent as the owners should be able to show success in that particular market place.
Of course while franchises do offer a moderately low risk entry they do have some traits which need to be thought through, including a thorough appraisal of the Franchise For Sale and of the figures offered by the seller. Also, for a free spirited entrepreneur the opportunity may be a little constricted. A franchisor will expect the brand and product or service to be upheld, with very little leeway for self- expression.
There is also the issue of competition to be considered within the Franchise itself, if it is a national organisation for example firm boundaries will need to be enforced. All that said the Franchise Opportunity does offer a low risk, soft start in owning your own business.