Growing Trends In Starting A Business

As unemployment rates remain stagnant, many people who once had well-paying jobs are forced to look for new ways to make a living. They often resort to starting their own business because it can be difficult to maintain the same standard of living by working at a low paying job and it can be even more difficult to go back to school to start retraining for a new industry.

While many people try to start their own businesses, it can be difficult to create a business from scratch, particularly if a person has no business experience because they have always worked as an employee.

The primary difficulty many people who start their own business face is a lack of know-how. A business is a complex entity and it can be easy to become overwhelmed trying to figure out how to write an executive summary, how to manage staff, how to run operations, how to market effectively, and how to balance financials. As a result, their business either doesn’t take off or they often make expensive mistakes that force them out of business within the first five years.

In contrast, many other budding entrepreneurs who recognize that they need help learning how to run a business decide to research the best franchises to own. As a result, they find a proven business model, get the business guidance and support they need, and build a reliable source of income for themselves and their family.

Small Business Trends

An article in Success Harbor titled What Percentage of Small Businesses Fail says, "According to the U.S. Bureau of Labor Statistics, about 50% of all new businesses survive 5 years or more, and about one-third survive 10-years or more."

There are 7 reasons for this dismal trend:

1. A small business may sell a product or service for which there is not enough demand for the business to be profitable. Although the idea may be a good one, the buying public is not interested in it. For instance, it’s a wonderful idea to create a business school to teach adults who are buried in debt about financial literacy, but the target audience may be fairly unresponsive.

2. A small business may have poor managers. As a result, they have a high employee turnover. Since the business is always in flux as it retrains new employees, productivity is low.

3. A small business may have insufficient capital. It takes some time for a business to become profitable. If there are not enough reserve funds, it can be difficult to manage monthly cash flow. A few slow months can quickly turn positive cash flow into negative cash flow.

4. A small business may rent a retail space for a good price, but the price is often low because it is in a poor location. As a result there isn’t enough pedestrian traffic.

5.A small business may flounder because of a lack of planning.

6.  A small business might try to expand too fast. As a result, it might rapidly increase its overheads before it can turn a profit or the small staff might become overwhelmed by the influx of new business.

7. A small business may fail due to weak marketing and sales strategies.

While it’s possible to get excellent information from government organizations interested in encouraging small business ownership, beginning entrepreneurs may still flounder.

Although the Small Business Administration (SBA) offers online courses at no cost on how to start, manage, and finance a business and organizations like SCORE connect entrepreneurs with retired executives who serve as mentors, this business advice is often not enough.

While these are excellent organizations, teaching entrepreneurs how to start and run a small business, are often not enough. The reason for their low success rate is because they only provide a broad picture of what to do and how to do it rather than actual hands-on, day-to-day guidance and support. They do work for people who have business experience and just need someone to point them in the right direction, but they don’t provide enough support for people who have little or no business experience. 

Franchising Trends

A franchise can offer an entrepreneur the chance to own a business without having to develop it from scratch because a franchisor offers business support for someone who has little or no business experience. Besides advice, franchisors also offer comprehensive training on the day-to-day details of running a business.

In addition to getting help in starting a business, it is easier to get funding because a franchise leverages an established brand image, uses tested operational processes, and deploys proven marketing and sales strategies.

As a result of all these factors, franchises tend to have a higher success rate compared to start up businesses. Moreover, it may cost less to buy a franchise than to start a comparable business.

According to a CNBC report, an International Franchise Association (IFA) study suggests steady growth of the franchise sector. The IFA also noted a steady growth in employment over the national average. In 2015, franchises provided 9.1 million jobs while the national average was about 8.8 million jobs.

Franchises that flourish often pay employees more than the minimum wage and provide more employee diversity. In addition, unlike other business models, expansion is easier. Once an entrepreneur understands how to run a profitable franchise, it becomes easier to create even more income through multi-unit ownership.