How To Investigate A Business Opportunity

Thinking of starting your own business this year, but don't want to launch a business completely from scratch? Then consider a business opportunity often referred to as a turnkey business. With a business opportunity package you are purchasing a system of doing business that often comes with an instructional manual or a video. There are no royalties to pay but there are often no support or follow-up opportunities.

Business opportunity packages are greatly distinguished from franchises. With a franchise, you are getting involved in a long term relationship with a franchisee. You are purchasing their signage, logos, uniforms, and systems of doing business. There is no originality that you can bring to the business. You must support the proven franchised system of doing business.

There are fundamental differences between a business opportunity and a franchise. A franchised business is based on a proven method of doing business. Most often, franchised businesses are "look-a-like" businesses, meaning that signage, outfits, offerings, menu, vans, logos, etc. are identical. When you pay the franchise fee, you are purchasing the rights to use these clearly identified logos and business symbols from that particular franchise corporation.

In order to run the franchise, you must follow the rules and regulations as set forward by the franchisor. They will want you to attend training classes, perhaps attend an annual convention, and will want to make sure you keep up with their standards. According to the International Franchise Association, you are in business for yourself, but not buy yourself.

Many entrepreneurs like the idea of purchasing this proven system of doing business. The franchisor will even help pick the site and will help design the store, the restaurant or office center.

You will be required to pay royalties every year to keep your franchise operation. The royalty fees go to a national advertising fund and also to a general fund to keep the franchsor operating at a profit.

The Business Opportunity

When you purchase a "business opportunity" package you needn't answer to anyone. You are purchasing instructions or some materials to conduct this business, but you are not purchasing a set of rules and regulations that you must follow to the letter.

Often, business opportunity packages are called "turnkey operations." The theory is that all you have to do is to launch the business opportunity is buy the package, read the material, study the manual or video, "turn the key" and open your business. Some of these start-up business opportunity packages cost $100 or less. Others cost thousands of dollars. But there is one common denominator: the opportunity should be investigated. Remember, let the buyer beware. There are several ways to investigate a business opportunity.

. 1. Call telephone information for the city in which the company is based and ask for the number of the local Better Business Bureau (BBB). Call the BBB and ask if they have a "reliability report" filed on the company. This report provides information on the company and will include whether or not complaints have been filed on the company. It will also let you know how the company handled those complaints. Also try calling the National Fraud Information Center at 800-876-7060 and the Call for Action Hotline at 301-652-HELP.

. 2. Call the Chamber of Commerce in the town where the company is based. Just because the company might not be a member doesn't mean they aren't reputable. But ask the Chamber of Commerce if they know of any reason why someone shouldn't do business with them. It doesn't hurt to hear what the word of mouth is about a particular enterprise.

. 3. Call the Attorney General's office in your state--often located in the State Capitol's office. Also check with the Secretary of State's office to see if there are any complaints filed on the company or if there are investigations pending.

. 4. Where did you hear about the business opportunity? At a local trade show? Through an ad? If it's in an ad, call the magazine who carried the ad and ask to speak to the advertising department. Do they have information on the company? How long have they been in business? Do they pay their bills on time? Has the magazine or trade sponsor received any complaints about the company?

. 5. Use your judgment. As you study the ad, ask yourself, "can I figure out what the business opportunity is from this ad?" If not, then run in the other direction. They are trying to be evasive. If you can't contact the company and get more information on what it is you are sending money to receive, then don't send a dime. Remember the old line, if it sounds too good to be true, it probably is! Not in every case, but in many.

. 6. Ask the company offering the business opportunity package if you can get a list of folks who invested in the package during the last two years. If they are legit, and if they are proud of what they are offering, they will be happy to put you in touch with their satisfied customers. If they won't do this, there very likely is something shady going on with that particular business opportunity program.

. 7. Companies that have a legitimate business opportunity package for you to look over--and we feature many of them in this magazine--should not be scared or dismayed if you want to receive some free additional information about the company before you invest in the program. This is a perfectly acceptable request.

. 8. The Federal Trade Commission offers a free package of information about the FTC Franchise and Business Opportunity Rule. Write to: Public Reference Branch, Federal Trade Commission, Washington, DC 20580 or call the FTC at 202-326-2222.

. 9. Use your instincts. If the opportunity doesn't sound or seem just right to you, stay away. Do some more research before you get involved with the company and follow tips one through 8 to conduct your due diligence investigation about the business and the specific opportunity.

. 10. Don't send money unless you completely understand what you are buying into, and even then, check it out before you send any money.

Steve Stanley is President of Tech Comp Associates, publisher of the Security Products Directory, visit: http://www.securityproductsdirectory.com