Answered Essay: What is a small business? What are some pros and cons of owning a small business?

What is a small business? What are some pros and cons of owning a small business?

What is a franchise? What are some pros and cons of owning a Franchise?

Would you rather own a small business or Franchise and why?

Expert Answer

small business typically has a small number of employees. In the United States, the legal definition of a small business is determined by the U.S. Small Business Administration (SBA), which sets the criteria to be used by the SBA in making small business determinations.

Pros of Small Business:-

  • Independence

Entrepreneurs are their own bosses. They make the decisions. They choose whom to do business with and what work they will do.

  • Control

It enables one to be involved in the total operation of the business, from concept to design to creation, from sales to business operations to customer response.

  • Opportunity

Entrepreneurship creates an opportunity for a person to make a contribution. Most new entrepreneurs help the local economy. A few—through their innovations—contribute to society as a whole.

Cons of Small Business

  • Risk

Even if the business has been structured to minimize the risk and liability to the owner, risk can’t be completely eliminated. For instance, if an individual leaves a secure job to follow an entrepreneurial dream and the business fails, this financial setback can be hard to overcome.

  • Financial commitment

Even the smallest of business ventures requires a certain amount of capital to start. For many people starting small businesses, their initial source of funding is personal savings, investments, or retirement funds.

  • Uncertainty

Even though the business may be successful at the start, external factors such as downturns in the economy, new competitors entering the marketplace, or shifts in consumer demand may stall the businesses growth.

Franchise

If you’re an entrepreneur, buying a well-known franchise might seem like an ideal business decision: It offers instant brand recognition, a trusted product and inclusion in nation-wide advertising campaigns. While owning a franchise has its perks, there is a lot more to it than sitting back and raking in the cash.

Pros of Franchise

  • Brand name

The more established franchises provide a market awareness & brand name to franchisees. This is likely to attract more customers quicker. Thus, it can amount to great savings in customer acquisition costs and allow for more time in the operation of the business.

  • Marketing/Advertising

Because of the brand name of the company don’t have to do much marketing or advertising in the market. There cost can be remaining in control.

  • Technology

Technology budgets in franchising have grown over the years. As a franchisee, you’ll benefit greatly from the technology that franchisors have in place these days. Some of this technology is designed to help you manage your customers.

Cons of Franchise

  • Additional Fee

You’ll be required to pay a franchise fee, up-front. This one-time investment (per franchise unit) is the cost of entry. It’s the licensing fee. The franchise fee allows you to use all of the franchisors proprietary information-legally.

  • The Rules

The company have to follow the rules that are defined by the company. They cannot change few rules even if they are not in your favor.

  • You will always owe royalty payments

Each and every year franchisees are required to make royalty payments in return for support in operations and advertising.

I would prefer to do Franchise because of the following reasons:-

  • Brand Recognition
  • Corporate Support
  • Less investment in marketing
  • Technology
  • Pre- defined the training plans
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