Fast Track To Entrepreneurship

Dominique Grubisa Dominique Grubisa

Starting your own business or buying a franchise aren’t the only ways of getting into the business world. A third alternative promises would-be entrepreneurs an affordable fast track to running a business, writes DG Institute’s Founder and CEO Dominique Grubisa.

If you’re considering getting into business, you might think there are two main ways of going about it. You either start up your own enterprise or you buy a franchise and pay a premium to have someone else do the groundwork for you.

For years, these were main routes for Australians entering the business world, and both came with considerable barriers to entry – and costs. But a third and more flexible route for becoming a business owner and entrepreneur is becoming increasingly popular with ordinary Australians known as ‘leveraged business turn-arounds’, the concept is relatively simple.

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Essentially, a leveraged business turnaround involves identifying a business that is faltering or underperforming, but that has real potential. You then negotiate with the owner to acquire control – potentially on a no-cash-down basis – and use your acumen and business skills to put the company back on track. The final stage is to sell the business – or your share of it – and repeat the process. The beauty of the approach is that it doesn’t initially require an enormous cash outlay, a traditional barrier to entrepreneurship.

So, how does a leveraged turn-around compare with the other options? What are the pros and cons of each? And what should you watch out for?

Here’s Why Business Turnarounds Is The Better Option

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Turnarounds

  • Avoid Enormous Start-Up Work
  • Minimal Money Upfront
  • Avoid Hiring & Staff Training
  • More Focus On Strategy & Profit Returns
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Startups & Franchises

  • Avoid Enormous Start-Up Work
  • Minimal Money Upfront
  • Avoid Hiring & Staff Training
  • More Focus On Strategy & Profit Returns

Business Start-Ups

Starting a business from scratch can be rewarding, but it takes considerable energy, time and money. Assuming you have a viable idea and business plan, you’ll need to rent premises, hire and train staff, invest in developing products and possibly, locating and fitting out a manufacturing facility. You’ll also need to think about branding, marketing strategies, sourcing suppliers, signing up distributors and creating intellectual property. Essentially every facet of turning the idea in your head into a going concern comes down to you.  And once you have invested your money and effort, the odds of success aren’t always in your favour. Figures from the Australian Bureau of Statistics show that 60 percent of new businesses fail within three years. Many don’t even last that long.

Franchise

Franchises take away the hard work of coming up with a business idea. As a franchisee, you’re buying a tried-and-tested concept that has worked in other markets and has the potential to work again. The items you’ll offer customers, the way you train staff and the branding you will use have all been pre-decided, meaning your primary focus is on running the business and making it viable. The main problem with franchises is cost. It’s expensive to buy in – often several hundred thousand dollars – and franchisees are then often expected to source all their materials from the franchiser who basically holds a monopoly. Franchisees are typically subject to the whims of the franchiser, who can change the product lines and prices without notice. And, as the 2019 Senate inquiry into the franchise industry showed, plenty of franchisees have gone broke when the profits promised by the franchiser failed to eventuate. 

Business Turn-Around

The leveraged business turn-around strategy helps you potentially avoid two of the biggest challenges of the other approaches, namely the enormous amount of work required for a start-up and the high costs of both start-ups and franchises.

Because you are dealing with an existing business with existing employees, premises, products, intellectual property and a customer base, you don’t face the same massive energy and financial costs as a start-up. The work is largely done for you, and your challenge lies in implementing strategies to get the business back on track and returning good profits.

Likewise, because you are targeting businesses that are underperforming and you are seeking a no-cash-down agreement, there may be no requirement to stump up enormous amounts of money upfront. In a typical leveraged agreement, you will negotiate to buy out the existing owner over time using the increased profits you bring to the business. It’s a win-win situation for both you and the business owner.

Key Takeaways

So, if you’re considering entering the business world to build wealth, do your research on all the options available. If your aim is to reduce the amount of cash you bring to the exercise and to use your time efficiently, you may find a leveraged turn-around works best for you.


W3Schools


Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

DOMINIQUE GRUBISA
Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practising legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at info@dginstitute.com.au


This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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