Free advisory services create an entrepreneurial opportunity.
The eventual financial success of a firm over time depends on its early survival. Carefully planned marketing objectives are a key element in the eventual success of a business. If someone comes up with an idea on how to build a better mousetrap, they still need to develop a marketing strategy to bring that idea to the marketplace. This is a fundamental but often overlooked premise of some people aspiring to start up a new business. Knowing how to market a product is just as important as having a product to market, perhaps more so. Managerial know-how, sources of information that are both reliable and valid, and the skills and abilities to use this information are hallmarks of successful business managers.
Access to expertise
One of the advantages of franchising is the access to expertise about the ins and outs of conducting the operations of a particular type of business. It is part of the franchising package and is advice generally worth the price it costs. Without a clearly articulated blueprint detailing what to do, when to do it, and how to work efficiently, many businesses might well fail. But it is not the only alternative to entering business.
The common benefits and considerations of a fairly typical contractual agreement between franchiser and franchisee can be used to portray an alternative to franchising as an approach to self-employment. The alternative is to start and operate a business using advisory services presently available through governmental agencies and private consultants. In short, the overall support, training and consultations typically made available through a franchising agreement are also available elsewhere for small businesses and would-be entrepreneurs.
Wealth of marketing-related expertise
Information on the Internet
There exists a wealth of marketing-related information on the internet. Sites for academics and practitioners can be found at <http://www.sbe.d.umn.edu/ resources> Here, one can find connections to the American Marketing Association Web page, an Internet resource guide to advertising, the latest discussions on critical marketing issues, and a survey of World Wide Web users, should a firm want to start researching the Internet as a virtual marketplace. A growing number of consumers do shop on the Internet saving time and money over more traditional ways. But how secure are these kinds of shopping ventures requiring credit card numbers to be electronically transmitted? Look no farther than "Marketing topics", located at the Web site mentioned above, for an informative discussion on secured Internet transactions.
Some aspiring entrepreneurs rely on their own store of knowledge and their established network of contacts, each of whom have additional stores of knowledge or expertise. The knowledge represents information which can be shared among individuals. This process can be conceptualized from a macro perspective by viewing flows of information being transmitted to the decision maker from a variety of support groups external to the firm. This is essentially a systems way of thinking. The information is used by the recipient to help meet the challenges of operating a business. The Internet works much the same way except it is somewhat more impersonal. It is also easier to "get in to see" someone since you need only click on their URL, i.e. their electronic address.
Highly regarded and highly regulated
Presently, franchising is a highly regarded and highly regulated industry, providing ample opportunity to spirited individuals seeking to realize their vision of going into business for themselves. The term "franchise" comes from the French, who use it to indicate privilege, opportunity, or freedom. It is the privilege of doing whatever activity or venture that an individual is motivated to do or feels like attempting with or without the counsel of an experienced advisor, for example, operating a business venture. Spirited entrepreneurs may elect to start their own business ventures, opting to secure a franchise and the valuable support that comes packaged with such an arrangement. A plethora of franchising opportunities are being successfully marketed across the country and around the globe. However, individuals may elect an alternative to franchising, namely, venturing out on their own using only the knowledge and support they presently possess or have access to in the form of professional networks, governmental agencies, or paid consultants from the private sector.
Valuable strategic marketing expertise and support
Entrepreneurs can elect to begin their business venture with a franchise or not, but if they elect to follow the franchise path, then valuable strategic marketing expertise and support is available either directly from the franchiser or from one of two professional organizations. The IFA (International Franchise Association) holds training sessions, and sponsors professional conferences and workshops providing a structure within which individuals prepare to become involved with franchising. It also maintains a list of pertinent publications such as Entrepreneur Magazine, Success Magazine and World Trade Magazine. Additionally, it lists professional associations to which members in need of expert advice can turn. IFA has recently been located on the Internet at <http://www.franchise.org> Here one can find a link to Franchise Research, an organization that researches pressing issues and designs creative solutions to complex challenges in franchising, under a hyperlink labeled "What's Hot".
A second organization representing the rights and interests of franchisees is the AAFD (American Association of Franchisees & Dealers) (AAFD, 1997). Its mission is to bring fairness to franchising by supplying helpful "how to" information ranging from how-to-buy a franchise to developing marketing strategies to legal and financial how-to-do it tips. AAFD supplies market and legislative support services as well as legal and financial support services. Members benefit by being able to utilize a franchising database, receive monthly newsletters, and attend national conferences where they are able to network with both franchisers and franchisees.
Timely training and solid preparation are critical elements preparing someone for entry into a given market. This is true for franchisers and franchisees, and it is equally true for entrepreneurs wishing to go it alone. If timing is everything, then when is the best time for aspiring entrepreneurs to strike out on their own and develop a pet idea that they may have carried around inside their heads for years while working for another, larger organization? Behavioral psychologists and business school professors tend to agree about human nature in general; that is, the sooner individuals get support, when learning something new or when they are faced with the unknown, the better. Support for franchisees comes from an existing parent company, that is a franchiser, or it comes from either the IFA or AAFD.
The duality of franchising
Several franchisers are really in two separate businesses. On the one hand, they have founded, developed, and operated their primary business such as Holiday Inn, McDonald's or a thousand other firms with various standard industrial classifications. They have run risks, faced uncertainties, and have survived as entrepreneurs. Yet, they are also in the business of selling or leasing their business know-how to franchisees. This is a secondary line of business for them. Hence, they supply the knowledge and training for using specific business procedures required to succeed in an increasing variety of businesses. These specific business practices and procedures are the success factors required for survival, growth and prosperity. individual franchisers differ from single proprietorships and entrepreneurial ventures by the very franchising network that is their second line of business and an important source of support. Franchisees, unlike the sole owner of a single venture firm, receive a great deal of support. For example, McDonald's succeeds because:
(1) demand strict adherence to its high standards; and
(2) because it has documented business strategies that have been time tested under fire on the battlefield of fast-food competition.
McDonald's has developed a basic business formula that is truly a recipe for success. It provides a quality product line, and trains and develops managers at McDonald University. Quality, service, cleanliness and friendliness are stressed throughout its training programs, managerial dealings and customer interfaces.
The lone entrepreneur
The lone entrepreneur, on the other hand, is on his/her own and faces numerous obstacles, many of which remain unknown to them. In fact, based on a variety of SBA studies detailing rates of failure among new business ventures, it appears that aspiring entrepreneurs are almost doomed to fail unless they receive external help in the form of financial and non-financial support. Such support is generally expensive or burdensome. If consultants are hired, this costs a great deal of money up front. On the other hand, if a venture partner is brought on board, much of the future profit will have to be shared. Venture capitalists, or white knights, if it should come to that, have very high expectations!
Failure in business is often traced back through the decision-making tree to the root problem of poor managerial judgment. While the spirit of "entrepreneurship", is alive and well in the US economy with over 170,000 new businesses starting up during the past fiscal year, many of these start-up ventures, as well as existing businesses, face financial woes because of poorly made decisions, or they face declining revenues brought on by poor or inadequate marketing strategy which in turn is the result of poor managerial decisions (Korets, 1997)
To help maximize the chances of succeeding, many entrepreneurial types are driven to find the definitive book to teach them how to develop a strategic plan for success. The SmallbizNet Bookstore located at <http:www.lowe. org/smbiznet/books/index.htm> contains annotated descriptions of business texts written for the practitioner ranging from Basic Accounting for the Small Business to Home Business Made Easy to Blunders in International Business to Selling on the Net, Advertising Handbook for Small Business, Bringing Your Product to Market, Marketing Creative Business Ideas, Keeping Customers Happy, Knowing Your Market and many, many more.
The BIC (Business Information Center), operated through the offices of the Small Business Administration, has put together a framework of services that will boggle your mind. Free consulting, import-export advisory services, loans, business plans and much, much more is available. We all help pay for this government agency so let's use it. Another good source is The Small & Home Based Business site, located at <http://www.bizoffice.com> which directs you to more than 200 Web sites such as Black Business <http://www. blackbusiness.com> and <Web Trade Directory http://www.webtrade.com> If you want to help beat the small business marketing blues and stay abreast of late-breaking news items to keep a small business profitable, try linking to Idea Cafe <http://www.ideacafe.com> Or, if the taxman is taking more than his fair share, you may benefit by visiting The Small Business Advisor site located at <http://www.isquare.com>
Because outcomes are predicated upon the inputs to a business, it is imperative that early support systems be in place at the very beginning. These support systems come from franchise headquarters, if franchising is the selected structure followed as an avenue into self-employment, i.e. a business of one's own. They also come from a new breed of consultants such as "Laflamme Services ... a 125-employee landscaping business in Bridgeport, CN (which helps) design marketing plans, write advertising copy, and print brochures" (Useem, 1997). Mr Laflamme's landscape consulting business is a sort of an incubator for landscaping ideas that he tests using various methods and techniques from the botanical side as well as using well established business benchmarks. Ideas that prove successful are sold to clients who own their own landscaping companies. This approach works much like a working cattle ranch, where guests pay to be dudes during their vacation from jobs and the stress of daily living and, thereby, provide additional cash flow to help maintain the bottom line. Thus, owners of small landscaping businesses work for Laflamme without pay in order to learn the ins-and-outs of the landscaping business and to receive help in developing new and improved ideas and procedures for their own businesses. They then pay a predetermined fee to Laflamme Services for the experience, information, benchmarks, and other business-related procedures.
Franchising opportunities continue to grow and are vigorously marketed with a wide variety of national and international businesses ranging from quite small to very large. Franchising opportunities include automobile dealerships, printing, travel-related businesses, transportation, destination resorts, fast-food establishments, pet stores, employment agencies, and legal and financial-related services, as well as a multitude of advisory services. While the product line and mix varies from one franchisee to another, each allows the franchisee to use a special license, process, motif, or recipe for conducting business. Available franchises include those ranging from Appleby's, Arby's and Dairy Queen, Hardees, Hooters, H & R Block to Long John Silvers, Midas, Popeyes, software City, Taco Bell and Wendys. Thus, a plethora of franchisees exist with well informed and well heeled franchisers in the background monitoring a variety of activities. Essentially, the franchiser exchanges knowledge, reputation, and patent rights detailing operating and marketing systems, training and development techniques, managerial procedures, and other technical advice unique to a particular line of business. This transfer of business knowledge and goodwill is a critical element of the franchising industry.
An important economic component
Franchising is an important component of our economy, creating employment for hundreds of thousands of individuals. It is a high profile industry, one highly marketed, and extremely successful in distributing goods and services based on common performance benchmarks of excellence that consumers have come to rely on and expect. Consistent performance in providing a quality product is a key element here and helps assure the future rapid growth of franchising.
But what happens if someone cannot obtain a franchise, for example from companies such as Nordic Track or Starbucks? Or, perhaps the entrepreneurial spirit is so strong that an individual simply wants to go it alone. What safeguards can he or she take to minimize risk and uncertainty? Who will become their guardian angels, their experienced counsel, their financial advisor?
A contractual agreement
Christensen (1996) writes, "franchising is part of a business system made up of interdependent but independent entities, yet is distinguished in that system by the addition of dependent relationships". What she apparently means by this statement is that support and co-operation are systematically supplied through legal channels or "systems" spelled out in the franchising agreement while the locus of day-to-day control rests with the independent franchisee. The agreement is a contractual one that is predicated on the legal concept of dual consideration denoting certain rights, privileges or license, granted to the franchisee by the franchiser, that are required to carry on some business. The agreement structures co-operation formally through legal channels. This type of co-operation may also be built on trust in other segments of the economy through networking or it may be established through some type of formal joint venture or informal liaisons with stakeholder institutions or entities external to one's own firm. For example, informal letters of understanding help establish trust and co-operation and cement relationships, hence leading to valuable working agreements between Microsoft and Boeing, for example, as Microsoft moves into the communication satellite business with McCaw Cellular. Similarly, AT&T has established working relationships with Disney and MGM. These deals might be formal mergers, either friendly or unfriendly. But, increasingly, they tend to be informal, hence working much like the Japanese equivalent of trade associations or keiretsu, where there exists an understanding about the importance of cooperation among and between producers, suppliers, buyers, customers and employees. These approaches to conducting business in today's dynamic economy seem also to be mirrored in many franchising relationships between franchisees and franchiser.
Customer service practice
Another form of co-operation also occurs outside of franchising circles. Quite often, firms include suppliers or customers as part of their decision-making teams to identify customers' wants and needs, to resolve inventory-related problem areas, or to tap the production expertise of suppliers. Often, this is done as a customer service practice. On the other hand, much of the training and support for such co-operation with franchises comes as a result of legal agreements within the franchising industry; however, a level of support is also available for entrepreneurs. While such support services are available through certain governmental agencies free of charge, the same kinds of services are also provided through consulting firms such as those making up the Big Six Accounting firms, Boston Consulting Group and others.
A start-up factory
Additionally, never ones to miss out on an opportunity, consulting entrepreneurs such as Bill Gross (see Useem, 1997) have established start-up business ventures such as Idealab whose core competency is Mr Gross's unique ability to spit out one brilliant business concept after another. Idealab acts as a support system for building businesses, and in this sense it is an operational "factory of sorts", one that chums out ideas for other factories and businesses to use to improve efficiencies and become more effective. "It's a start-up factory ... a business of creating businesses" that transcends a structured incubator because it provides plant, facilities, support staff, actual employees and financing. Gross has a five-step process that has proven quite successful. First, he assigns an Idealab project team to a new company beginning the development cycle. Second, the team conducts market research to secure specific information about product requirements, developing a prototype, writing a detailed business plan, and providing seed money. During the third step of the plan, a CEO and start-up staff are hired, put into place, and begin to refine the prototypes and continue the market research. Fourth, the business goes "live (with more) Staffers hired according to growth" and additional financial aid is provided as required. The fifth and last step in the start-up process is taking the company public or acquiring it for Idealab's own portfolio. In other words, the business joins Bill Gross's Idealab family, i.e. is acquired by the investors who are rewarded with future rates of return. Perhaps, with this kind of business venture being formed to help other businesses startup and survive, we are witnessing another Microsoft in its infancy with another Bill at the helm.
Aspiring entrepreneurs may not have as much capital as they would like, nor will they always have sufficient experience in each key functional area of their business. For example, they may be expert at marketing but have only a rudimentary understanding of accounting and finance. Or, it may be the opposite, solid financial skills but a marketing neophyte. Most likely their career paths can be traced through specialty areas leaving them vulnerable to certain external threats and internal weaknesses. They also struggle with the uncertain nature of business ventures and the concomitant risks and uncertainties linked to organization survival of new businesses and their own chances for success in a business of their own. Where do they turn for critical support? If not to a franchiser or to someone like Bill Gross, then perhaps they should turn to local, stale, and federal government agencies.
Sources and uses of information:
A number of Internet hot links have been created for the sole purpose of assisting new and existing businesses. For the aspiring entrepreneur, this assistance serves as an alternative to franchising - for example, advice, counsel, and information dealing with exports are supplied by the International Trade Administration at <http://business.gov/Trade.html> Common questions and answers from the Small Business Administration are posted daily, as are issues, concerns, and strategies dealing with taxes at <http://www.sba.gov/hotlist/indexframe.html> Also, an amazing number of databases are chock full of information that serve as clearing houses for all electronic information from federal, state and local governments; for example, see <http://www.business.gov/Search.html> At this link, an amazing amount of "how-to" tools, guides and forms are available to help entrepreneurs solve problems, obtain financing, develop marketing plans, or simply to do business".
With the accelerating growth of information available through the Internet, there is an increasing number of support resources that can be tapped. Thus, if aspiring entrepreneurs wish to maximize their chances for success, yet do not want to follow the franchise road, then they must become acquainted with the multitude of sources and uses of information, where information is the wise counsel of experience and the sources governmental agencies, or they are the expensive fee consultants such as Big Six accounting firms, Boston Consulting Group, or people like Bill Gross and Ed Laflamme.
Online resources and regulations
One of my favorite sources of information, "Welcome to the US Business Advisor, a one-stop electronic link to government for business", appears when you connect to the Internet at <http://www.business.gov/> Here, I can find online resources and regulations for a wide variety of topics of interest to would-be entrepreneurs complete with expert step-by-step guides. The information can be searched or browsed depending on individual preference. Information on exporting, social security, taxes, financing a business and more is readily available. To coin a phrase, "Let your fingers do the walking on the keyboard, and forget the Yellow Pages!"
Simply stated, there is a wide variety of information and support available; one needs only seek it out. Using the Internet and a PC is as easy as ABC. For example, the SBA -- Starting Your Business -- is located at <http://www.sba.gov/ business_management/StartingYourBusiness.html> and provides additional links to BIC (Business Information Centers), SCORE (Service Core of Retired Executives), SDC (Small Business Development Centers), and SBA's One Stop Capital Shops. The SBA has gathered agency and institutional information related to the financial and technical assistance needs of small businesses in one convenient location. And it has brought together a group of retired executives from a wide variety of backgrounds who serve as non-fee consultants to would-be entrepreneurs aspiring to operate new or existing businesses successfully.
Reach out and click on
Specialized loan programs are also part of the SBA's links. These programs are reached at <http:..www.sba.giv/business_finances/FinancingYour Business.html> Someone willing-to wade through the information can find assistance. If wading without a life preserver is not to your liking, then a non-fee consultation is available through SBA, BIC, SCORE, FISBE or SBIDA. Or, you can literally reach out and click on hyperlink "Find An Expert" at <http:www.lesko.com/expert_search.html> Here you will find a search engine allowing you to access the US Government's world source of expertise. For the price of a telephone call you can talk with experts about topics ranging from aardvarks or AAA bonds to zero-sum games or zymurgy.
Starting and managing a business takes motivation, desire and
talent. It also takes research and planning.
Like a chess game, success in small business starts with decisive
and correct opening moves. And although initial mistakes are not
fatal, it takes skill, discipline and hard work to regain the advantage.
To increase your chance for success, take the time up front to
explore and evaluate your business and personal goals. Then use
this information to build a comprehensive and well-thought-out
business plan that will help you reach these goals.
The process of developing a business plan will help you think
through some important issues that you may not have considered
yet. Your plan will become a valuable tool as you set out to
raise money for your business. It should also provide milestones
to gauge your success. (<http://www.sba.gov/gopher/
If enterprising entrepreneurs decide that the best route for them is to go into business for themselves following the franchising road, then they should consider starting the journey by visiting "The Franchise Handbook: On-Line" at <http://www.franchise1.com/> Once connected, they will find a "directory" of franchise opportunities, a directory of "business opportunities", "links" to more franchise information on the Web, information on how to "advertise", and more. An interesting site is the American Bar Association on Franchising, whose "mission ... is to be a center of information on laws affecting franchising, studying and investigating developments in the field, educating and providing a forum to promote improvements in the law as it affects franchising" (<http://www. abanet.org/forums/franchising.html> 1997).
Two important connections
Should enterprising entrepreneurs elect to bypass the franchising road, they may elect to go it alone and enter into business ownership with a completely new start-up venture. If so, they might want to make two important initial connections via the Web. First, they should link to "How to start a small business" at <http://www.sba.gov/gopher/Business ... ormation-And-Publications/obd1.txt> Here they will find information on assessing their skills, knowledge and abilities as they relate to successful ownership and operations of small businesses. Secondly, they should research business plans and identify sources of funds. Connecting with their PCs to "The business plan road map to success workbook" at <http://www.sbaonline. sba.gov/gophe... Training/Business-Plan/busplan.txt> gives them ample opportunity to understand a business plan and to develop one that meets the GAAP (general accepted accounting procedures) guidelines required by bankers, venture capitalists, white knights and guardian angels. It does, however, require the aspiring entrepreneur to turn to the Government for assistance, assistance that is provided without charge.
Turning to the Government for assistance may well go against the grain of some venture capitalists and the entrepreneurs they finance. Yet, as Bob Dylan once sang in verse, "the times they are a changing". Individuals looking for a competitive edge need to seize each opportunity as it presents itself. Or, as Charles Darwin wrote: "It is not the strongest of the species that survives, nor the most intelligent; it is the one that is most adaptable to change". Over the past 50 years business people have come increasingly to accept the importance of keeping the customer's interest in mind, perhaps with a resulting downplay on short-term profit and production. This is true of the public agencies presently using the Internet to offer assistance in the form of consultations, arranging for loan money to be available, and protecting the rights of minorities and women-owned businesses.
Mitigate the risks
In today's fast-paced world, business management is faced with some difficult planning decisions involving developments relating to its customers, its competitors, and even its own resources. The implications for management is to mitigate the risks associated with resource commitment, adding new products or new markets, and staying abreast of a rapidly, highly dynamic business environment. Frequently, the owner-manager is replaced with hired management. The critical focal point becomes "the length of time of the hiring", with consultations being short lived versus the permanent hiring of top-level management by boards of directors to run the operations day-to-day as well as over the long run.
Modern marketing concept
The strategic marketing concept was conceived to help establish management as part science and part philosophy in the midst of highly uncertain planning scenarios presently existing in today's complex business world. Any business manager who is committed to this modem marketing concept will focus his/her creative efforts on carving out a market niche through:
(1) the introduction of new products and services;
(2) the promotion of new uses of existing products;
(3) the identification of new customers; and
(4) the research of new means of producing goods and services needed by specified segments of the marketplace.
Implications for society
There are several implications for society of the roles played out by franchise groups, aspiring entrepreneurs, and the public agencies that help them. Economic competition will be enhanced, thus bringing more efficient and more effective businesses to the forefront, resulting in better values in the marketplace for consumer dollars. These efficiencies will be achieved through specialization and the tried and true practices of established franchises, and through young entrepreneurs learning about the specialization from more experienced practitioners, all of whom emphasize the needs of the customer and the need for better ways of selling. The Internet is one pretty good example of a variety of sources of information. The Internet is also a good example of a new channel of distribution used by an increasing number of businesses to reach new classes of consumers. Achieving the correct marketing mix requires valid and reliable sources of information; it also requires the skills, knowledge, and abilities to make use of an expanding database of information.
AAFD (1997), <http://www.aafd.org> May 15.
Christensen, S. (1996), "Ethics in franchising: the foundation is trust", Franchising Research: An International Journal, Vol. I No. I.
<http://www.abanet.org/forums/franchising.html> (1997), May 16.
<http://www.sba.gov/gopher/Business-Development/ General-Information-And-Publications/obdl.txt> (1997), May 15.
Koretz, G. (1997), "Economic trends: startups still,a job engine", Business Week, 24 March, p. 26.
Useem, J. (1997), "For sale: management expertise for small companies", Inc., February, p. 26.
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|Author:||McGinty, Robert L.|
|Publication:||Journal of Consumer Marketing|
|Date:||Jan 1, 1998|
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