Any small business owners out there?

[LonghornGal]

Hi all,

I am pondering an opportunity and would love some information - has anyone around here held down a full-time job for a corporation while starting / running their own business. I'm specifically interested in those that have taken on a small franchise or chain business while still keeping their full-time job.

Would you do it again? Am I insane to contemplate this? What were the major issues and rewards?

Right now I know I'd have to seriously reorganize my time management. I also know that I'd be juggling a LOT of balls. But there's a pretty decent prospect out there and I'm meeting with the current owner this week to get more details.

-ack - someone may need to check me into a mental hospital! I'm thinking I might be certifiable to even entertain the idea of my own business, but nothing ventured, nothing gained, right?

[jmarie]

small franchise or chain business

Sometimes these are cost prohibitive. Do you have a business incubator nearby? They could give you a wealth of information!

I can't help you much because our small business is rental property.
But, Good luck!
Joyce

[mst]

I did this. I started a "franchise" of a business while working FT. Then, as the business grew, I gave up my FT job. I loved it, gained so much from it. But, owning your own business is a gazillion more hours than you can even imagine. It does become your life, and you will not sleep. It is like a child. But, then you are just as proud when it is successful.

Know that you will lose money for a while. They say the average time for a business to become profitable is 5 years.

I ended up having to give up my business to get health insurance. Broke my heart. Would I do it again? Well, I would do it again the first time. But, I am not sure I have the energy to start it again the second time, even though I know what I am doing.

Does that help?

[jmarie]

I ended up having to give up my business to get health insurance.

This is true in a case I just heard of recently. Someone started a real estate agancy. She had quite a few agants, stayed in business two or three years and then closed her doors becuase she needed a job with benefits. Put everyone working for her out of work. I know of a fellow who has always had his own car repair business and his wife was a SAHM and his book-keeper from age 18 and all of her life until she hit 50. She then went to work as an aide in the school system for the benefits.

We are self-employed but driving school buses provides us the benefits that we need.
Joyce

[mbrogier]

My dad has owned several small businesses--I can't remember them all. He always says, incorporate, incorporate, incorporate. If the business is a proprietorship and you get sued (or your partner does), you could lose your house and all your possesions. He started some of his businesses while working for another company, but he is always doing 10 things at once. Ask a lot of questions, be wary of the sales pitch of "you'll get your investment back in 6 months, etc" :rolleyes:, and have a lawyer look everything over before you sign or agree to anything. I know a lot of people that started their own business, and they loved it.

[BeachBum]

I think you haven't gotten many replies because it is so hard to generalize. My DH and I own a business, but it is not a franchise. I could not imagine running our business from afar.
I think the type of business makes a huge difference. For example a Subway Sandwich Shop would be much harder than say, Hallmark. I think most small business owners would tell you than managing employees (including locating talent, hiring, scheduling etc) is their biggest challenge. If your business is labor intensive then I would be more skeptical of the opportunity while holding down another job.
With a franchise situation hopefully some of the mystery and risk is removed. I would assume they would let you talk with other franchise owners. I think that would be your best source of info to answer your questions.
I had a friend that wanted to open her own business and my advice to her was to work in a similar business for at least a year. She lasted 3 months before she realized the type of work was not for her. Perhaps you could do something similar?
Good Luck.

[LonghornGal]

:)

Thanks everyone.

You're right, it is very general. I am looking at a personal fitness facility - one of the "30 minute" circuit training ones. I've talked a bit with the current owner and she did mention staffing - that currently they're in good shape but when folks go on vacation there's problems.

Can anyone expound upon insurance, landlords, incorporating, or finding a good lawyer? How about tax implications?

--Kristin

[Arete]

I think that the SBA (Small Business Administration) has people available to advise new business owners for no or a low fee. Also, there is an organization called SCORE (can't remember what the acronym is exactly, but it is comprised of current and retired executives) that offers advice for new business owners. Either of these would be a good place to get initial info and contacts regarding incorporation, accounting practices, etc., etc.

Also, you will want to have the help of someone to assess the current health of the business and its value. People can make even the crummiest business look prosperous, so you need someone that is good at analyzing P&L statements, profit margins, etc to help you decide what the business is worth.

Good Luck!

[Meganator]

We used a lawyer to draw up our papers for incorporation. However, one of our employees is starting up a business, and she and her partner used resources from the web (this is in Texas, as you are). Do some research and maybe you can prepare and file your own Articles of Incorporation, which are pretty cookie-cutter - you just have to decide what type of corporation works best for you (we are an S corp.); then you can save your attorney fees for the items that you really need them for.

Also, re: insurance (business and health both): shop around! Rates can vary widely. This is an ongoing process - each time your rates get raised, you will want to shop it.

Re: landlords: if you are going into an existing business location, you will not have a choice in this matter. We have been in 3 different location, and never had what I would call a "problem" - the people/companies who own strip centers or the type of place you will probably be will most likely be reputable and by the book. However, one note of caution, from experience: the building we are currently in is owned by USAA, which is an insurance company. Because of that, they have requirements for business insurance above and beyond the standards amounts for our industry. They also have very limited times/days when things can be moved in and out (because if it is during regular business hours, someone may trip over a box or something and file an insurance/legal claim), which has been a bit inconvenient. But the insurance thing we weren't aware of until we were committed, and it forced us to incur additional costs that we weren't happy about.

[mbrogier]

Try pulling the CLUE report on the business location to check for any damages and claims on the property. You have to pay $10 for property you don't own, but it might save you some trouble later own.

There are organizations, like Arete said, that will help you with a lot of questions, and you might find a mentor. I've seen community colleges hold night seminars on starting your own business. You might find some info there as well.

When my dad had his real estate agency, he had his benefits through Traveler's insurance. They had a program set up for realtors. Because realtors were grouped together through a membership group, the rates were MUCH better than they would be for a company with just a few employees. You might search around and see if there are any groups like that for fitness center owners.

Also, find out why the previous owners are REALLY quitting. You'll have to dig, but I know from experience that answers people give and the truth isn't always the same.

You're much less likely to get jerked around if you have a savvy business lawyer. It will cost more upfront, but it could save you a lot down the road. You'll need a good CPA later anyway, so find one who can check the books now. If you're seriously negotiating and the owners aren't wanting you to check the books, beware.

[Robyncz]

I suspect I know what franchise you're talking about. I have a friend who owns one in San Antonio. I'd be happy to put you in touch with her if you're interested. PM me and we can talk.

[clairea]

DISCLAIMER -- I am not an active member of the Texas bar, and this is not legal advice;)

I would definitely recommned getting into some sort of limited liability structure if you are opening a business. You can set up an S corporation, as others have mentioned, or a limited liability corporation which generally provides the same tax and liability protection benefits, with more flexibility than an S corp. Maybe one of the current Texas lawyers can chime in about exactly what is available in Texas -- it has been 10 years since I practiced there. I'm sure there are forms available on the web, but these things are not complicated to set up and you should be able to find a lawyer to do it for very little money (maybe a few hundred dollars?). That way you can be sure you have a corporate structure that works for you, not just a boilerplate form.

When I did practice law I worked with a lot of start-ups, so feel free to PM if you want to know more generally about these kinds of issues.

Claire

[Jazzmatazz49]

Mr. Jazzmatazz is a CPA and runs numbers all the time for people who are buying or selling businesses. I've heard him say a hundred times, "It has to cash flow or it's not a deal." Whether he's right or not, I think it would be worth your while to talk to a CPA.

[oceanjasper]

Hi LonghornGal,

I had a small retail business, open 7 days a week, and held a full time job. I can honestly tell you that I hope to never be in that situation again.

Having a small business had its advantages, the biggest one being that it gave me the knowledge and experience, outside of my studies, that I needed to land the full time job I got and have since improved upon. Lots of people find that their business allows them to have flexible hours and vacation, but I didn't find that at all. I think the number one disadvantage of having a business is that it never leaves you, ever. You go home at night, it will be there. You go on vacation, it will be there.

I would like to say that I would never do it again, but I just don't know what life has in store for me. I just really love working for someone else, making way more money than I did having my own business (including having a pension, getting benefits, etc.), and being able to go home at night leaving it all behind. Even though I have other things that have replaced that responsibility, like continuing my studies, I still feel like my load has been lightened significantly.

As a person who has started a business from scratch and knows how brutal poor cash flows can be, I definitely recommend that you are thorough in researching the financial aspects of the business. This includes the legal and tax implications of the type of business it would be and a real honest look at your personal financial ability to carry the business yourself, should you ever need to. Believe me, it isn't worth lying awake at night wondering how you are going to pay your employees or using your last penny of retirement savings trying to keep things operational.

I really didn't post to discourage you. I just wanted to share my experience and I am 100% certain that others feel differently. I know lots of people in my town who have had and continue to have successful small businesses and love it. They are also very much hands on, which I think adds immensely to their success.

If this is something that you would really love to do and you think you can do it and all the important aspects of the business are positives...then go for it! Overall, you won't lose, because you will either be happy and blessed by your decision or you won't be, but you will have gained so much from your experience that anything else you do in life will advantage from it. :)

[LonghornGal]

Thanks again for the input! And I definitely want all sides of the coin - I want to know the WORST CASE scenario!

Luckily I took several small biz courses while getting my MBA and suddenly the 30 business valuations I had to do in the Fall 03 semester are going to have some value. The cash flow is definitely key, as is growth rates (grow or die, right?) And my small biz professor has recommended some local lawyers to me - he's owned various businesses over the years so I trust his advice. My financial guy offered to help me take a look at the books.

Basically my plan of action is to get as much info as I can in the first meeting with the owners - stuff like the real "why" of selling (not just I want to spend more time on other things!), the financial status, cash flows, issues, liabilities, equipment maintenance and depreciation, franchise fees, competition, all that jazz. I'm making a big list of questions!

Then I'm going to go home and crunch some serious numbers based on what I learn. Come up with my own value for this biz. If my value and the asking price are within shouting distance of each other, then I'm getting a CPA and a lawyer and possibly a banker. Then I'm going on vacation for a week to think it over - assess the pluses and minuses of the whole proposition. At that point, my family will probably commit me to the looney bin!

Keep chiming in. Think of all the horrible things that could happen and write them down. I need serious serious serious reality here.

[RebeccaT]

Hi there Kristin,

Just wanted to post with my experience. DH and I looked into opening a retail franchise, with a store in Houston and rights to develop the entire state of Texas. We were thinking big - we didn't want to do it as a side project or just so that I would have a "little job," we wanted something we could both eventually take to the next level. Because we had such big plans for this, and because DH is a total realist, we did MAJOR due diligence. We didn't just talk to the company representatives, although we did spend a lot of time talking with them. We also called other franchise owners around the country to learn more about how the business was working, and any issues they had with the parent company. What we learned was that the company was NOT supportive of its licensees, and that it did not have the infrastructure in place to grow at the rate they were pushing to grow. Long story short, we didn't pull the trigger. We were so sad to miss the opportunity, but we really feared that we could be making a big mistake.

I strongly urge you to call up other franchises, in other locations, and learn more about how it is to run the business. What are the regulations in place by the parent company? How much control/oversight do they have? How dependent on them will you be? Do they provide support for internal systems such as payroll, inventory, POS, membership and fees, etc? Or is that all in your hands? The current owners are trying to sell, it is in their interest to paint the best picture possible. You need to find out what it's really like.

I do think that there is a support network in Austin that is just for women small-business owners, you might check with them for resources as well.

Also, I will say that your UT MBA will have done a lot to prepare you to examine this fully. DH was able to get us really far down the path before we had to call in a lawyer, just because of that background.

Good luck!