Business Opportunity Advantages and Disadvantages

When it comes to starting a business, many people think that buying or investing in a business opportunity is a shortcut to success. While there can be some truth to this, not all business opportunities are created equal.

Here are the advantages and disadvantages of investing in a business opportunity and what to look out for when you need to choose the right business opportunity for you.

Advantages of Business Opportunities

Unlike franchises, business opportunities require a lower initial investment. The average selling price is around $2,500. However, there are many business opportunities that can be started for less than $100, most of which fall into the network marketing or MLM business opportunity category.

Appealing features of some business opportunities include the following:

  • Assistance from the parent company with in-depth training and support programs.
  • Better advertising and business promotion than the business opportunity buyer could normally afford on his own.
  • Ongoing support, including legal assistance, accounting systems and other helpful counseling – but less management supervision than a franchise.
  • No royalty payments to be made regularly to the business opportunity, as in a franchise. All profits go to the business owner.
  • Better financing than the buyer could obtain on his own.
  • Site selection performed by professionals with the clout to insure the most advantageous location.

Disadvantages of Business Opportunities

The criteria spelled out above make the business opportunity sound like the ideal situation for someone looking for a good business investment. In fact, the would-be business opportunity investor can find legitimate business opportunities in fields as diverse as children’s businesses, education, home improvement, and maintenance.

But what about those business opportunities we all see on the Internet, with the promise of thousands of dollars a month instantly, no training necessary, and the buyer gets to work all day in his pajamas?

Here are some other warning signs that a business opportunity may not be all that it seems:

  • The business seller may not give you the support you were led to expect, in which case the buyer has little recourse.
  • The seller has included an exclusivity clause, requiring the buyer to purchase only the seller’s products. This is a matter that the smart buyer should negotiate before the sale is finalized.
  • The location has not been carefully selected for optimum sales.
  • If the parent company declares bankruptcy, the satellite business could go under as well.

The Federal Trade Commission is attempting to insure that business opportunity buyers will obtain complete disclosure of all necessary information in order to make an informed business purchase. However, almost all regulations in place today apply only to business opportunities with an initial investment exceeding $500.

The potential business opportunity buyer should investigate the history of the company he is thinking of investing in, including financial stability and general reputation in the business world. The savvy buyer will ask lots of questions, review any disclosure information in detail, and understand exactly what costs and obligations are spelled out for both buyer and the business opportunity.

In other words, proceed carefully and cautiously. The research done prior to signing with a business opportunity will benefit the buyer and seller alike. Remember the old adage – if it sounds too good to be true, it probably is.

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