Special Report #106
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WHY MOST BUSINESSES FAIL
FRANCHISING VS. NORMAL BUSINESS

The four major reasons why businesses fail according to Dun and Bradstreet and other sources are:

• Personal – the wrong personality of the owner in the business
• Lack of capital – not enough money to keep the business going during the rough times
• Lack of marketing knowledge – if the owner can’t properly use his resources to bring customers to the business, the company will have insufficient sales to generate a bottom line profit
• Inexperience – in other words, bad judgment and avoidable mistakes

Personal – If the owner is not passionate about the business and the business is not suited to the proper personality of the owner, the business is far from reaching its potential. Unless the owner has had previous experience in a related business field, the owner is taking a chance on whether he will like the business and whether his personality will fit in with the current structure. With a franchise, the owner only needs to find the right franchise out of over 2000 that fits him best.

Lack of capital – Most owners of normal businesses go into the business with not enough capital because they don’t know what to expect. Once the capital runs out, they have nowhere else to turn and they are forced to close or sell. With a franchise, many owners have already proven how much capital is required for success and financing is readily available for good franchise concepts.

Lack of marketing knowledge – If the owner of the business doesn’t know how to bring a steady stream of customers in the door, he will have to use trial and error and spend more money than necessary to figure it out. With a franchise, the marketing systems are already in place and there is a proven track record on the marketing results. Franchises have the advantage of name brand recognition to make the marketing systems more effective.

Inexperience – An individual beginning or taking over a new business, that they are unfamiliar with, will plan to make changes and improve the business. Without specific experience in running the business it is very common that an owner will make changes that will not benefit the business in the long run. With a franchise, once again there is a proven system and many other owners to rely upon to help the business owner to make the right decisions. On-going support from experienced franchisors that have a great incentive to see the franchisee succeed will make a big difference in the chances of success of the franchised business.

The bottom line is that franchises have a much higher success rate than normal businesses because three out of the four major causes of failure in business are practically non-existent in a good franchise. The fourth area of personality can be dealt with by making sure the new business owner’s personality will fit the type of franchise he intends to purchase.