What Is Software Escrow? The Alternative Answer

Software escrow means deposit of the software's source code into an account held by a third party escrow agent. Escrow is typically requested by a party licensing software (the "licensee"), to ensure maintenance of the software. The software source code is released to the licensee if the licensor files for bankruptcy or otherwise fails to maintain and update the software as promised in the software license agreement.

What Is Software Source Code?
Source code is the software's programming code represented in a particular programming language that humans can write and understand.

Picking an Escrow Agent
Either the licensor or licensee should pick an escrow agent. Generally, the licensor should pick and pay for the agent so that the owner of the software has the choice of which third party will be responsible for storing and handling the source code. Additionally, the licensor often will have more than one licensee request escrow, and having the same agent each time makes the record keeping and contract negotiation much simpler.
Often, licensees will allow the licensor to pick the agent if the licensor also pays the escrow fees. When picking an agent, be sure to investigate the background and financial status of the company. An agent with no assets and without substantial insurance coverage is not a good choice. The agent should have substantial resources, so that the parties to the escrow agreement may be protected in the event of the agent's negligence and ensuing litigation, or in the event of loss of the code and financial reimbursement by the agent's insurance company.

Costs of Software Escrow
Software escrow fees are typically between $1000 and $2000 per year per licensee. There is some variation based on different pricing structures. Some companies will reduce the rates for licensors who have substantial numbers of licensee deposits.

Escrow Agreement
The software escrow agreement is a three party contract that governs the procedures and terms of the escrow process between the licensor, licensee and agent. Usually, the software license agreement will contain a clause that states that the parties agree to escrow and will execute a separate agreement to cover those terms. As this agreement involves three parties, the negotiations can be more difficult than usual.
The party that chooses and pays the agent should negotiate its terms with the agent prior to bringing the third party into the negotiations. This will save time in that two of the three parties will already have agreed on the contract wording prior to the third party reviewing the agreement.
Important Terms

Procedures
The agreement should outline the procedures for the deposit and handling of the code by the licensor and agent, including what will be deposited (updates, customizations, etc.) and how often the deposits should occur. How the agent is to receive the code, and where and how it is to be stored should also be addressed.
The agreement must also define the procedures for release of the code after an event that's recognized as triggering its release. These procedures should include notice to the parties, deadlines for response and counter argument, opportunity to seek court order, and so on.
Events Triggering Release of the Code
The agreement should state what events result in release of the code to the licensee. These may include:

• The licensor filing for bankruptcy
• The licensor breaching the license agreement
• The licensor failing to provide maintenance as agreed
• The licensor going through a merger or acquisition resulting in a new licensing entity
• The licensor should always try to limit the release events solely to failure to provide maintenance.

If any of the other events above occur and the licensor continues to provide maintenance as agreed, there is no reason to justify release of the source code and release may cause substantial damage to the licensor in this event.

What is Software Escrow?

Getting someone to write software for you can result in a wonderful, custom solution to your problem. It can also incur a significant amount of risk if things go wrong.
Software escrow is one way of protecting you in certain types of projects when certain things go wrong.
When you contract out for software to be written for you, there are several decisions that are part of the process. One that's often overlooked is whether or not you get a copy of the source code when the project is done.
The source code is the collection of written instructions that the programmer actually writes to create a program. For many types of programs, the source code is then transformed into the "executable" that you actually run. For example "notepad.exe" is a executable program that comes with Windows. Somewhere back at Microsoft they keep the written instructions, or source code, that the programmers used to create it.
Open source software projects make the source code publicly accessible. Anyone with enough knowledge can create the software executable using the source code. Closed source, or "proprietary" software is just the opposite ... the source code is not available publicly, only the executable. Companies use this approach to retain their intellectual property, and trade secrets.
When you contract with someone to write software for you one decision, implied or explicit, is whether the source code belongs exclusively to the developer, or whether you get a copy. If you do, you have the safety of being able to have someone else make changes or fix bugs in the future, but the developer is giving up some of his or her potential control of that software. If the developer retains the source code and you don't have access to it, then you are dependant on the developer for all future updates. Typically developers will charge more if you get the source code.
It's common to opt for the cheaper option, or to have the developer simply not give you the option.
So what happens if your developer goes out of business? What if all of the source code simply disappears?
That's where software or source code escrow comes into play.
As part of arranging for your software to be written, you and the developer can agree that a copy of the source code will be given to a neutral third party - an escrow agent. The agreement would then specify under which conditions that agent would be allowed to release the source code to you. For example one of the conditions might be the developer's bankruptcy or going out of business for other reasons. By using software escrow, the developer is protected as long as it makes sense for them to retain control, and you are protected should the developer disappear. (Naturally other conditions might trigger the release, but the developer's going out of business is a clear example.)
Software escrow is not fool proof. For example, what happens if the escrow agent goes away? And escrow typically adds some cost to your transaction.

Long term success achieved with the appropriate Software for small businesses

The three S's which spells success for your small business - Software, Security and Speed.
Software for small businesses are very essential for fast and steady long term growth. The opportune software should be built on both communicative as well as a collaborative platform. Small business software caters to the basic needs such as sales, customer support and marketing. However selecting the right type of software to suit your specific business requirements is the key to success
Be it a big or small business, software is vital for smooth functioning of key area operations: sales, marketing and customer support. The sales functionality requires a system to track and follow up automatically on each and every transaction made by the customer as well as maintain unique individual files for each customer. This will enable swift communication to and from the customer. Marketing helps boost the image and credibility in the market. It involves the overall maintenance of e-mail invoices, individual customized billing templates, tracking expenses without having any accounts knowledge. Customer support services include feature rich techniques for creating and tracking customer inquiries after the initial sales transactions as well as maintaining a post sales detailed report for every customer.

• While selecting the right type of software for your business a few tips to keep in mind
• Research analysis of the business is a must before adopting particular software.
• Target audience for the product/ service offered by the enterprises should be taken into consideration.
• Payment details as well as whether you require a payment gate way.
• Necessity of E-commerce and shopping in the near future.
• Collaboration portals to suit your specific needs: chat messenger, task manager, calendar, contacts and document sharing facility.
• What type of process centric business application would adapt well to your unique business needs: sales, billing and customer support services.

Small businesses, apart from size are very similar to big established business giants. To get to the top, one needs to select, implement and maintain the right type of software your small business requires for its specific goals and objectives.

Home Business Requirements

The idea of running a business from home has always had a certain appeal--albeit one that can be easily undercut when you actually wade through the complex rules surrounding taxes, insurance and other details.
Getting started isn't as simple as plugging in a computer and getting down to business. If you've set up shop at home or you're thinking about doing so, it's now more important than ever to understand what's involved and how to use current home-work rules to your advantage.
Where the tax picture is brighter. Deductions are the name of the game here, and the big question is: Do you qualify to write off home-office-related expenses? To get the "yes" answer you want, the IRS generally requires that you use your home office "exclusively" and "regularly" for business--meaning you can't transform your office into a family room after business hours. Moreover, the home office still has to meet one of three criteria. You're fine if the structure that's used for your business isn't attached to your residence, if you use the office to meet with clients or if the office is your "principal place of business."
So what can you deduct? In general, you can write off a portion of expenses that pertain to your whole residence, such as repairs, mortgage interest or rent, property taxes, insurance and utilities. You can figure the deductible percentage of these expenses one of two ways: Divide the number of rooms in your office by the number of rooms in the house (if they are roughly the same size), or calculate the square footage of your home office and divide by the square footage of the entire home.
Remember, though, that home-related deductible expenses can't exceed the income generated by the business. Expenses that pertain only to the home office--business owners insurance or office supplies, say--are 100% deductible and not subject to that limitation.
Zoning matters. This may not be the first thing you think of, but local zoning laws can affect your home office. In some cities, you need a business license and will have to pay a fee every year. Other cities restrict the right of property owners to build separate structures. Zoning laws can limit the number of employees or clients in your home office at the same time (or even forbid you from having them). There may also be restrictions on how much of your home can be used exclusively for business.
Insurance. What if an employee or a client gets hurt in your office? Don't count on homeowners insurance to cover you. A standard homeowners insurance policy provides no business liability coverage and very limited property coverage for business equipment. And if you operate a business without your insurer's knowledge, things can get murky. For example, if you are baking cookies to sell and there's a fire as a result, you may not be covered. The reason is that the business operation, not normal household activity, was responsible for the damage.One solution may be to add an endorsement to your homeowners policy to cover your office property and equipment, and general liability. This could run from $50 to $500 a year, depending on the nature of your business.With some enterprises, you may need a separate business owners policy, which offers more comprehensive coverage, including business auto insurance, workers' compensation and different types of liability coverage. Landscapers or others who generate income off-site aren't even eligible for an endorsement. Also, if lots of clients visit or you have more than $5,000 in equipment, consider a separate policy.
Because of the recent explosion of the home-office market, some insurers have developed specialized policies, which cost between $250 and $1,000 a year for property, on- and off-premises liability and loss of business data or income. Your best bet is to ask the agent who wrote your homeowners policy to write your home-office policy. That way you can be sure to avoid coverage gaps or overlaps.

The IRS has a holiday gift for you. Really?

How would you like a new computer for your business this holiday season?

Even better, how about ten computers, a few printers, and some iPhones? Or maybe an SUV, how would that Hummer look under your tree (awkward comes to mind, but it’s doubtful anyone would complain.)

The preceding will happen for millions of businesses this holiday season, with the IRS playing Santa Claus. All because of a provision to the US tax code called Section 179.

What is Section 179, and how does it work?

In simple terms, Section 179 is an attempt by the United States government to stimulate the economy by encouraging small to medium sized businesses to purchase equipment this year by making it very advantageous in a tax sense.

In a nutshell, it works like this:

Normally, when a business purchases equipment, they do not get to “write it off” right away. They instead must “depreciate” it over the course of several years. So a business could not realize the full tax advantages until years after the fact.

Section 179 does away with this, and allows certain pieces of equipment (including most electronics and office machines, and even some vehicles) to be deducted in full the year they are purchased. This is an enormous differential, and indeed spurs many businesses to make year-end purchases (because the equipment must be purchased and put into service by midnight 12/31/2007.)

Consider this:

Under the old provision of depreciation: A business purchases a $5,000 computer system, and yields a taxable income savings of $1,000 a year over five years. Yes, that’s nice, but it’s hardly going to make a business run out and buy a system right now. A business would simply buy the computer system when they needed to upgrade, and not a minute sooner.

Under section 179: That same business would realize the full $5,000 deduction this year. This can have a profound effect on the taxes this business pays. That might make the business buy the system right now.

Why right now? Because tax codes change, so the smart business will take advantage of Section 179 while it’s viable and actually look to buy qualified equipment this year. And since many pieces of needed equipment qualify (even many SUV’s qualify), it makes it very easy to justify a year-end purchase (statements like “we were going to need new computers anyway” so we may as well save some tax dollars are often heard around the office supply store.)

Just like Santa doesn’t bring gifts to bad children (so the rumor says); there are some limits to what a business can deduct. While the list of qualified equipment is extensive, you still may want to make sure what you are buying qualifies. There is also a limit to how much money can be spent. $500,000 is the limit that a business can spend on qualified equipment to fully qualify for the deduction, and the total deduction cannot be more than $125,000. But most small businesses will not reach these numbers, so Section 179 is truly a “small to medium sized business” deduction, and aimed squarely at helping these businesses grow.

How do I get my business on the internet?

This is one of the most frequently asked questions by small business owners. They are feeling the pressure from their customers and competitors, yet for many business people it is a daunting task, as they don't understand the whole process.
In fact, many people are even asking the question whether they should have a website. Whether you are a consultant, florist, designer, builder, architect or a doctor, consider the many advantages a website provides:

1. Make money - Set up an on-line store or get paid for advertising from other companies
2. Save money on advertising - Instead of paying for large ads, simply advertise your website
3. Be flexible in your message - Change the content as your business changes. No need to re-print expensive brochures.
4. Exposure to new customers - You will reach more local clients as well as interstate and global markets
5. Having more professional image - Keep up with the times and your competitors
6. Save time - Don't spend hours on the phone, direct customers to your website
7. Keep your business open 24/7 - Provide customers information when THEY need it. If you don't, someone else will.
   

So what does it really take to get your website set up?

Step 1 - Register your domain name OR not.
The big question is whether you need to register a domain name or not. The simple answer is NO, but a better answer is YES it is a good idea.
What is a domain name?
The purpose of a domain name is similar to that of a street address or telephone number. The domain name directs customers to you on the Internet. The domain by itself is not your email or web address. The domain does form the base from which these addresses are derived.
For example:
Company Name: QikPhone
Domain Name: qikphone.com.au
Web Address: www.qikphone.com.au
Email Address: sales@qikphone.com
Do I need to register a domain name to have a website?
NO, you don't need to have your own domain name. Your website can be created and hosted without it. Your website address will look something like this:
www.web4business.com.au/JBCleaning OR www.ozemail.com.au/~JBCleaning
The only advantage of not registering a domain name is that you will save yourself a few dollars.

The disadvantages of NOT having your domain name include:
1. If you decide to change your Webhosting company or if that company goes out of business, you will lose your website address. Your website can be transferred to a new company, but your address will change. And that means re-printing stationery and re-doing all your advertising, notifying all your customers etc.
2. Website addresses that contain information other than your company name are long and hard to remember and do not appear as professional. Compare these two and see which one you are more likely to remember: www.ozemail.com.au/~JBCleaning OR www.JBCleaning.com.au

So it is a good idea to register a domain name, even if it is just to protect yourself for the future. Say for example, your business name is JB Cleaning and you decide not to register your domain name for now. Along comes Joe Bloggs who opens his own cleaning business and registers JBCleaning.com.au domain name. After a year you decide you want to have your own domain name, but since Joe Bloggs already owns it, you won't be able to register it. Not to mention your customers who know your business as JB Cleaning may visit his website, thinking it's your web address and instead hire Joe Bloggs Cleaning.

Step 2 - Plan your website.
Planning your website is a two part process:
(a) Decide on the website design (colour schemes, buttons, special effects etc). This is your website designer's job. However, you may have a preference for a certain colour or look. To help you choose a design, you may wish to check out other people's websites or work with your web designer's pre-set templates.
(b) The content. There are many items you may wish to include on your website. The most common ones include:
1 Product/Service Details
2. Contact Information
3. Pricing
4. Testimonials
5. Frequently Asked Questions
6. Response Form, such as "Join Mailing List"
7. On-line Magazine or Newsletter
8. Resources & Articles
9. Guarantee
10. Survey
11. Events Calender
12. Search My Website Form
13. Refund Policy
14. Privacy Policy
15. About Us Information
16. Site Map
17. Copyright information
18. Useful Links
19. Media Information
20. On-line store
21. News
22. Directions to Your Bricks & Mortar Premises
23. Blog
24. Trade Association memberships

Step 3 - Choose a Web Hosting Company.
What is a Web hosting Company?
A Web host is a company that provides server space for your website. You can think of a web host as a commercial building. The web host provides space for your website just as a commercial building provides space for your shop or office. You can build your own building and you can host your own website, but because of the cost and expertise required it is easier to rent the space.
Which Company Should I Choose?
Web hosting companies are not created equal so you need to take a number of things into account when selecting one. A proven track record, experience and reliability form the foundation of any successful business partnership.

Some of the issues you should consider when choosing a webhosting company include:
1. Support - Does it provide comprehensive Technical Support - 24 hours a day, seven days a week?
2. Reliability - Does it have multiple large-scale links to the internet to provide a fail-safe path to your customers from anywhere in the world?
3. Security - Does it have a robust security system that minimises risk of web site intrusion?
4. State-of-the-art - Does the company utilises leading edge technology and is supported by a large-scale uninterruptible power supply (UPS) system.
5. Scalability - Does the product range and services offered allow your business to grow without impediment by making it easy to upgrade and add components to existing product levels.
Step 4 - Getting people to your site.
The marketing of your website is important if you want to draw visitors to your site. If you don't promote your website no-one will ever see it. There are a number of different ways of advertising your website. The best strategy is one, which integrates your existing promotion methods with your website.
1. Office Stationery - Including your web address and email address on your stationery is probably the easiest way to draw attention to your site. It's cost effective and gets your Internet presence out there in the market place.
2. Business Cards - When printing business cards you should include the individual's email address and main address of your website.
3. Radio Advertising - Radio Advertising should include your web address. Don't include the http://, try "Visit us on the internet at w-w-w-dot-qikphone-dot-com-dot-au". If your budget is limited, you may wish to consider community radios.
4. Email and Mail-Outs - Let your current customers know the details of your website. You can either send them an email or a letter/postcard. Keep your website's content up-to-date and they will keep coming back!
5. Print Media - Print advertising should include a generic email address for the company and include your website address. Normally positioned at the bottom right or bottom centre of your advertisement.
6. Search Engines & Directories - People looking for your website who don't know the URL are most likely to use an on-line search engine to look for your organisation or the kind of products and services you offer. There are over 300 major search engines and directories, but you should concentrate on the larger, more commonly used ones. These include: Google, Yahoo, Altavista, Anzwers, Inktomi, Infoseek, Lycos, Excite, HotBot, MSN, Dogpile, AllTheWeb etc.
7. Links from other websites - A good way to attract visitors to your site is through the use of hyperlinks placed on other sites. If you know of another site which has a list of links and you think your website would be a good addition, let the website owner know. You might also offer to provide a link from your site back to the other site. This will encourage the webmaster to include your site. You should also seek out partners for trading links including vendors, suppliers and providers of complimentary products.

8. Link Exchange - Another way to getting a link is through a system called Link Exchange, a free public service designed to help websites advertise each other. With Link Exchange, you agree to display advertising banners for other Link Exchange members and they agree to display banners for you. The System is automatic, you simply add a piece of HTML code to your web page and Link Exchange will display an advertisement for another website. The disadvantage with Link Exchange is that you don't get any control as to where your banner ad appears or the type of banner ads that will appear on your website. It is not possible to guarantee that a competitor of yours may have their banner ad displayed on your site.

9. Paid Banner Advertising/Affiliate Marketing Programs - Various sites give you the opportunity to purchase banner advertising on their site. Some sites will charge you a flat monthly fee while other sites will charge you based on the number of people who see your ad.
For more information about marketing your website read "30 ways to promote your website on a shoestring budget"

Step 5 - Monitor your site's statistics
Your website's statistics should show who visits your website, where in the world they come from, how they are finding your site and what pages are being viewed. Knowing your customers is the first step in effective marketing. Most webhosting companies will provide access to this information free of charge.

Step 6 - Maintaining your website
It is important to update your website regularly to keep your customers interested. One of the great advantages of having a website is that you can change its content virtually overnight at minimal cost (unlike re-printing brochures and flyers). This is just a brief overview of the process involved in getting your website up and running. In future articles we will cover each step in more detail.

Starting An Internet Home Based Business - Five Common Mistakes To Avoid

Many people who would like to start an Internet home based business have no idea of the best way to get started. Starting an Internet home based business is definitely exciting but the experience can also be overwhelming. There are vast numbers of Internet home based business opportunities available and researching just a few likely looking ones, can result in information overload.You can easily succeed with an Internet home business opportunity if you avoid these five common mistakes when starting out.So what are some of the most common mistakes that people who are starting a home based business can make?
1. Failing to plan and set themselves goals.
Starting an Internet home based business without making a business plan which includes budgets is the first step towards disaster. Having step by step goals and a plan of how much is to be spent at each stage is vitally important. It is essential to know what you want to achieve from your business and how much you intend to spend on start up and ongoing promotion.

2. Failing To Follow A Proven Business Model
There is no need to act like a pioneer in the Wild West when you are starting your home based business. There are any number of examples of proven money making business models on the Internet. Duplication will enable you to succeed with your Internet home based business: find someone who is in the position you want to achieve and duplicate what they did to succeed. If you join a turnkey Internet home based business opportunity, you will have access to training material which will show you exactly what steps you need to take to achieve success in your home business.

3. Falling for a get rich quick scheme
Don't think starting an Internet home based business means you will get rich overnight. This type of unrealistic expectation is one of the biggest reasons people give up soon after starting a home based business. Getting any business into profit mode will take a certain amount of time, and an Internet home based business is certainly no exception.

4. Falling For The "Free" Myth
If you believe you can have a successful Internet home based business without making any financial investment, you are heading for a grave disappointment. There are many valuable free resources available online but expecting to start and develop a serious Internet business with out any outlay is simply not realistic.

5. Giving Up Too Easily
Your two best friends when first starting an Internet home based business will be patience and persistence. Actually, come to think of it, those two will remain your best friends all the way to reaching profit mode and beyond. Becoming successful with an Internet home based business will take time and you must be prepared to exercise patience while you are working towards your goals. You also need to use persisence when working at promoting your business because there are bound to be tasks that seem boring to you.If you avoid these five common mistakes, you can find success with your home based business.

Elaine Currie works from home. Her "Top Ranked" Work At Home Directory gives you all the information you need about starting an Internet Home Based Business and developing it into a successful enterprise.

What is Affiliate Programs?

Affiliate programs offer a low cost way for people to start their own online business even if they have no previous relevant experience. However, many people fail with affiliate programs and most of them fail for the same reason. This is nothing to do with lack of affiliate program information, it is because they do not start out the right way to succeed with the affiliate program they choose to promote.With an affiliate program, there are several simple but important steps you will need to take in order to make a success of your business and earn the money you want. Following the simple steps listed below will enable you to make dramatic progress so you can start to earn money from your affiliate program at an early stage.
1. Look for an affiliate program in a niche that interests you. Your business is a long term commitment, if you get involved with an affiliate program in a niche that holds no interest for you, running your business will be less interesting and enjoyable. The internet offers plenty of affiliate program information so you can easily find the best niche to suit your interests, there is no need to rush into the first affiliate program you see. Make a short list of possible niches and then go on to looking at the affiliate programs from the financial perspective.
2. Select a lucrative niche from the affiliate program information you have gathered. Don't be tempted to rush the affiliate program research. Your goal is to earn money, and you need to ensure an affiliate program is likely to be profitable before you make a commitment. The internet is full of information about profitable niches, and you will need to research these before you decide on the best business opportunity for you.
3. Another important piece of affiliate program information you will need to research is the reputation of the affiliate program owner. You need to find affiliate programs with good reputations and high quality products or services that will appeal to your customers.
4. Set yourself a goal: decide how much you want to earn from the affiliate program within a set amount of time and write this down. You will need a goal to work towards and writing down your goals is important. As you achieve each goal, you can cross it through and replace it with a more ambitious goal.5. Create your own website to market your choice of affiliate program. The affiliate program will undoubtedly provide you with your own affiliate web page but creating your own unique website will attract the search engines and having your site listed in the search engines is an important step. Make your website interesting to human visitors by offering some free tools, e-books etc on your site as well as having articles related to your affiliate program.
6. Place advertisements on your website. You can earn money by displaying advertisements on behalf of companies such as Google, Yahoo, Revenue Pilot, Adbrite and numerous others.
7. Start a linking campaign. Links are very important to all online businesses, not just affiliate programs. Information you need to remember is that links from other sites will help improve the ranking of your website. One way links are more important than reciprocal links but reciprocal links are still of value.8. List your website in major and niche directories, this is time-consuming but free and can be done in stages to reduce the boredom. If you have a reasonable budget for promotion of your affiliate program, you might want to consider buying software to perform this task.
9. Write and distribute articles to article directories. This is a free and highly effective way to market your affiliate program and obtain one way links from other websites.10. Become an active participant in Internet forums related to affiliate program marketing and to your particular niche subject. Most Internet forums are free to join and allow you to include a link to your affiliate program or personal website as part of your signature.

All Fortunes Begin With an Idea!

A new idea is merely the combination of two or more old ideas. The creation of a new idea is the critical first step in establishing any business.

With the quality of work he d done and the amount of time he put into it, I would have expected to pay double that amount. His resistance to naming his price reminded me of my small business clients who have the same problem.

People who dream of setting up their own business but don t succeed, generally fall into one of three categories:

(1) too few ideas
(2) too many ideas or
(3) waiting for the perfect idea .

Any of these three states of mind may hinder the budding entrepreneur.

Would be entrepreneurs with too few ideas.

These individuals typically say if only I had an idea for a business.

Just remember that if you say you don t have an idea it really means you have no-idea ! If this applies to you, you need to get cracking on that first idea fast! As soon as you are able to dream something up, you ll have the essential ingredient that all successful businesses are built upon.

Would be entrepreneurs with too many ideas.

Can you ever have too many ideas I hear you say? Well if your creative process leaves you feeling overwhelmed for choice then it s definitely a possibility! Many highly creative people experience inertia in business purely because they have so many ideas. They don t know where to start or which idea to implement first!

If you fall into this category, just pick one of your ideas (it doesn't need to be your best one!) and begin to mentally develop it further. Consider the first key steps you need to take to push your business idea forward. Remember that you don t have to have a 100 page business plan or a fully formed idea before you can start taking action! All you need is a little focus.

Would be entrepreneurs waiting for the perfect idea.

This is the equivalent of expecting to know how to swim once you ve found the perfect swimming costume.

If you fall into this category, even if you do manage to find the perfect idea , ask yourself whether or not you are going to have the right skill base to get it off the ground. Many successful entrepreneurs have failed many times before their perfect idea came along. It is through being prepared to fall down and stand up again that you develop the tenacity required to succeed in business.

Stay Ahead of the Game.

Whatever your circumstances, whether you are in business already or looking to start a business, creating ideas and being innovative will help keep you on top of your game. The way we are doing business globally is changing at such a rapid rate that if you don t consistently innovate, you will soon be out of business.

Cultivate your Innovation skills.

All the entrepreneurs that I have met have been possibility thinkers . By this I mean they keep their minds open to new opportunities and new ways of thinking. The best way for you to cultivate this ability within yourself is to spend time around other creative thinkers. Challenge each other to innovate.

A Simple Idea Creating Exercise.

Two nights ago I had a brainstorming session with a couple of entrepreneurial friends over a meal. We did a little 5 minute exercise where each wrote down as many ideas as they could on how to create a million pounds within a year. The quality of the initial ideas was absolutely irrelevant. What was really valuable was what came afterwards, when each person read out their individual lists and we discussed how these particular ideas could work.

We had a lot of fun, a lot of laughs and generated a couple of really great business ideas (as well as plenty of ordinary ones!), purely by focusing our brains to answer a simple question.

So how many entrepreneurs does it take to change a light bulb?

Well I m not entirely sure on the answer to that one! But I do know how many ideas it takes to start a business

Just one.

7 Methods in Choosing a Business

The process of selecting the right business can go beyond choosing one that fits your personality. Know the other approaches you can use in choosing a business.

Choosing the right business is the first step to entrepreneurial success. According to studies made by the U.S. Small Business Administration, only 66.0 percent of small businesses survive its first two years, and survival rate lowers to 39.5 percent in at least 6 years. In 2000, it is estimated that 550,000 small businesses closed, and business failure for one-person businesses is about 38.2 percent.

Your goal, therefore, as an entrepreneur is to find a business that stands a greater chance at success. You will need to determine what you can and cannot do, research on the potential market and how other similar businesses are doing, and what works well in your area or selected business medium.

Dr. Irving Burstiner, in his book, "How to Start and Run Your Own Retail Business" offers various approaches in choosing the best type of business. While he focuses mainly on the retail business, the methods he suggests are applicable across various types and business medium, even the Internet.

1. Less Money Out.

The first school of thought focuses on the amount of resources that you have. The kind of business that you start depends on the amount of capital you can raise. If you have deep pockets, you can go all out with your business - getting first-rate equipment and furnishings, hiring employees, launching the business in grand style, and buying loads of inventory. However, if you have little capital, all you can do is to stretch what you have and start the business on a much smaller scale.

You may have a wonderful concept for a children's bookstore with play and storytelling sections for kids, and a coffee shop for the adults. That kind of vision requires vast amounts of capital - from inventory, lease, furnishings and store décor. If you cannot finance your vision, you may need to downscale your business and instead find ways to start on this route but without the expense. One way is to start an e-commerce site where you will not have to pay for furnishings, expensive rent and other overhead that a retail store will need.

2. Novelty and Excitement.

Another strategy for selecting a business is to start one that is currently hot, hip and new. In the Philippines, for example, pearl shakes - an innovative cool beverage drink in natural flavors mixed with "pearls," or dark, spherical, chewy balls made from yam and tapioca -- became the hottest craze in town. Mom and pop stalls and cafes offering this new drink popped up all over the metropolitan Manila.

You can join in the fray, and start a business that has already proven itself to be a moneymaker for others. However, there is danger in adopting a start-up strategy on prior demand--demand already created by others. What if the business runs out of steam, and the novelty and excitement that pushed it initially wears thin? You may be faced with cutthroat competition, with price-cutting as the ultimate marketing weapon of choice.

3. Safety in Numbers.

As a new entrepreneur, you may also consider a business that has already proven popular, dependable with consistent demand, and can be found everywhere. Common businesses include eating places, groceries, used merchandise stores, gift and novelty stores. If these businesses have staying power and are frequently found, then they must be profitable, right?

Well, not always. There is such thing called "market over saturation." A small town may be able to accommodate only one gift shop. Add another one and you may be stretching the market too thin, and end up in the dustbin.

4. The Fewer, the Better.

On the other side of the spectrum from those who believe in safety in numbers are those who think that they are better off in a business with fewer competitors. This is the idea behind the strategy of focusing on a market niche, which has proven to be apt, even a lifesaver, for many small and home-based businesses. Niche entails offering unique products or services to a few concentrated markets.

5. Rapid Growth.

You may also want to start a business that has enjoyed fast growth in the past years. A rapidly growing business sector, where many new businesses continue to operate, shows that there is great demand for the product; the market can absorb new entrants; and if by looking at the size of businesses operating, the market may be profitable even for one-person businesses.

Using data from the Bureau of Census, you will find that the sectors that enjoyed the most rapid growth from 1972 to 1987 include the following: Gift, novelty and souvenir stores (up 216%); Hobby, toy and game shops (up 180%); book stores (up 137%); Sporting good stores and bicycle shops (up 127%); and florists (up by 108%).

The sectors that saw a decrease include: Drinking places (down 17%); Household appliance stores (down 15%); and variety stores (down 5%). The reasons for the shrinking number of businesses in these sectors include overcrowding and declining customer interest and demand.

6. Failure Rate Method.

You may check the businesses with the greatest number of failure record. Dun and Bradstreet (http://www.dnb.com) publishes a yearly Business Failure Record report. This report is not merely an estimate; but represent complete tallies of business failures. D&B defines business failures as those that "ceased operations following assignment or bankruptcy; ceased operations with losses to creditors after such actions as foreclosure or attachment; voluntarily withdrew leaving unpaid debts; were involved in court actions such as receivership, reorganization or arrangement; or voluntarily compromised with creditors."

In 1997, the businesses with the lowest failure rates (per 1,000 listed concerns) include drug and proprietary stores (33); fuel dealers (37); sewing, needlework and piece goods (41), used merchandise stores (47); and liquor store (52). On the other hand, non-store retailers (216); trucking and warehousing (208); fishing, hunting and trapping (273) are the businesses with the highest failure records.

7. Biggest Payoff.

Another logical choice for choosing a business is to look for those that yields the best return-on-investment. This approach involves "checking through the operating results for different business types to find those with high percentages of operating profit."

The best source of data that would allow you to determine an industry's operating profit is the Risk Management Association's http://www.rmahq.org Annual Statement Studies. This report offers financial statement ratios of small and medium-sized businesses on about 600 industries. The book costs $145 for non-members, but check with your local library if they carry the publication.

Whatever business you decide to start, the key is to put up an enterprise that fills an unmet need of the market and to look for new niches to dominate.

Tips on Choosing Your Own Home Business

You want your own business, maybe to be financially independent, be your own boss, work at your own time, and maybe, just maybe, retire as a multi-millionaire at the age of 35! But do you know what business you should start?

You have decided that you want your own business for a variety of reasons: maybe you want to be financially independent, or be your own boss, work at your own time, and maybe, just maybe, retire as a multi-millionaire at the age of 35! But do you know what business you should start?

Selecting the right kind of business is a difficult process for any starting entrepreneur. Many dream of starting their own businesses, but remain frozen in status quo mainly because they do not know what business to engage in. Good ideas seem to be a dime-a-dozen, with newspapers filled with stories of how teens are reaching financial nirvana on very simple business concepts. Unfortunately, the next big business model perfectly eludes you!

Here are ten tips on selecting the home business most suited for you.

1. Instead of choosing the first business that comes to mind, take time to explore various options. Check out other business ideas! Read books providing ideas for possible home-based or small business, and trade magazine articles on trends and market demands. With the phenomenal growth of the Internet, information is now literally at the tip of your fingertips.

2. Find out what type of business appeals to you most. Read our Hard Knock’s Guide to Selecting a Business. Determine your goals, interests, wants and capabilities. You can turn your fascination for miniature shoes into a business; or your skill and expertise in designing graphics into a fledging business enterprise. The important thing is that you must enjoy your business. The most successful entrepreneurs feel passionate about what they are doing. You cannot feel passionate (and hence more driven) about your business if you do not like it!

3. Choose a business that will be personally satisfying as well as profitable. While you may have passion for your hobby or craft, always consider its business potentials. Do you think there is a demand for it? Will it bring you recurring income? How saturated is the market? Are there barriers to entry? Will you have economies of scale? Start a business that you think has a solid potential to be profitable. You will need to do a lot of pencil pushing and calculating to determine the financial viability of a business. This will entail analyzing your market and conducting a break-even analysis, a preliminary financial projection that shows you the amount of revenue you'll need to bring in to cover your expenses. It may sound like a lot of hard work, particularly if you’re not a financial whiz, but this is one of the important steps in assessing whether the business you’ve selected can make you money.

4. Think whether you can and want to handle every aspect of the business. When you start your new small business, you may not have the luxury of a full-time staff complement to help out in some aspects of the business. Instead of simply focusing on the strategic direction of the business, you may be required to collect receivables, track expenses, cold call customers, and do thousands of other tasks. Be aware of the other tasks that you have to do in your business.

5. Draw a layout of your intended work area to see how it will fit into its allotted space into your home. Remember, you are starting a business at home to save on overhead costs, so make use of every possible nook and cranny that you can use in your house. If you want to start a cake decorating business, you need to have a large kitchen. Forget about starting a dance instruction class if you live in a studio apartment!

6. Make sure the business meets high safety standards, esp. if you have children at home. This is particularly essential if your business deals and uses chemicals and other harmful substances. For instance, keep all the chemicals used for a carpet or upholstery cleaning business in a safe place in the garage beyond the reach of children.

7. Check with an insurance agent to determine the kind of insurance coverage the business is going to need. It is good planning to determine what insurance is necessary to minimize your risks and protect your business. General categories of insurance include property, licensing, liability, health, disability, workers' compensation, and life insurance.

8. Ensure compliance with zoning laws and ordinances in your area. Visit your city hall or the planning office to see whether zoning regulations would prevent you from selecting a specific location. Carefully note the regulations governing business signs and types of businesses that are allowed at different locations. You do not want the city hall folks to come knocking down at your door asking you to cease operations after you have spent thousands decorating and equipping your business!

9. Select a business whose organizational characteristics are compatible with yourself or your family. You should select a business that fits well with the schedule of your family. If you have a newborn baby in the house and your husband works full time, you should look for a business that would allow you to take care of your baby. Businesses that would compel you to actively seek clients out like a real estate endeavor may not be suited for you at this point.

10. Get your family members involved in the business and have fun together working for its success! Every telecommuter dreams of merging home and office, career and family into a symbiotic blend of harmonious bliss. It is not always easy, but one way will be to involve your family in your home business. During summer, you can ask your kids to help in the packing of your product. Or your teen son can help design your Web site. Your spouse can help in negotiating with your clients. The most important thing, though, is that everyone in your family enjoys working in your business.

No Clue as to What Business to Start?

Are you one of those who want to start a business yet has no clue what and where to start? Welcome to the club! Many people want to start a business, but are at a loss to the kind and nature of business to start.

The thought of starting a business can be daunting and frightening - even for those who eventually succeed. Self-doubt, insecurities, and fear often serve as stumbling blocks. They feel that they are not good enough, not creative enough, or not smart enough to run a business.
More so if they do not know what business to start.
Many would-be entrepreneurs are at a loss as to what kind of business to start. They daydream of becoming their own boss and controlling their financial destiny, but don't know what business will get them there.
Their greatest fear is that their business ideas may not be brilliant or acceptable enough. They are afraid that their products and services will not have enough market to sustain the business. They are afraid that chasing after their dream of becoming their own boss would only lead to failure.
Is this fear justified?
Of course! But then again, there are many good ideas out there. Believe it or not, clever product and service are dime a dozen. Most of us have at least one good idea, but these ideas often never get implemented.
Studies in fact show that lack of good idea is not the primary cause of the failure of many small businesses. Businesses fail because of the entrepreneur's lack of preparedness. Many entrepreneurs start a business, not because they have a business idea that can be profitable; rather, they are dissatisfied with their present state of affairs. They may be frustrated with their current job, or have an urgent need for additional money - that they'll jump into any business venture without first checking it out. Without carefully investigating the business, it would seem like "jumping from the frying pan straight to the fire."
Where can you get good business ideas? Searching for new ideas and concepts is a formidable task. Some ideas spring forth, fully formed. Others simmer for years, waiting for the opportune moment.
The business idea for you may lie in your previous work experience or your familiarity with the daily operations of a business.
It may be a result of your side activities, hobbies or other interests. Many entrepreneurs consider business ideas that will provide the greatest likelihood of meeting their desire for personal fulfillment.
Business ideas can come, not from your interest level or experience, but from after a thorough analytical search. You can look at the potential profitability of the business, and determine the comparability of the business with both your investment and income goals. Or you can study the projected growth of the industry to see if the business can commensurate for the level of risk it require.
Starting a business from scratch is not something that can be done on a whim. But there is nothing better or more fulfilling than starting a business from your own idea, and seeing it grow into a success.

Should You Buy A Franchise? Part 1

(The previous page of this article summarizes the advantages and disadvantages of buying a franchise.)

The Franchise Application

The first step in buying a franchise is to contact the franchisor operating a franchise that you’re interested in. Usually when you express an interest, the franchisor will expect you to complete a questionnaire or application form.

Do not be surprised that the franchisor’s questions include detailed questions about your finances. A franchisor will want to know about your personal assets, for example, because he or she wants to make sure you have a fall-back position to carry the business in case it runs into financial difficulty.

You will probably also be asked about your spouse’s financial situation. Once again, the franchisor wants to be sure that both of you are prepared to make the financial commitment necessary to start and run the franchise successfully.

You’re also sure to be asked questions about your experience, background, and even aspirations, questions designed to help the franchisor determine whether or not you’re the kind of person he or she feels will be able to run the business successfully and fit into the franchise model.

This second point is especially important to franchisors, because successful franchises depend on the uniform application of the system they have developed. They do not want people that they view as too independent, or people who are going to “gum up the works” because they can’t resist experimenting or applying their own ideas.

The Interview

If you “pass” the questionnaire or application test, the next step is usually a meeting with the franchisor that you can think of as a job interview. The franchisor will continue to explore your interest, commitment and suitability; you, on the other hand, will be trying to find out as much as possible about the franchise.

The Franchise Contract

If the franchisor decides you are a suitable franchisee, you will be offered a franchise contract that lays out the obligations of both parties. You should seek legal advice about the contract and go over it carefully. Like any other contract, some aspects of it may be open to negotiation. And like any other contract, if there are any promises made about the franchisor/franchisee relationship that are not in the franchise contract, get them written in.

Is Franchising For You?

Is there a franchise in your future? Buying a franchise is like buying any other kind of business in that you have to do your due diligence and investigate the franchise fully. However, if you are the right sort of person for a franchise operation and pick the right franchise, being a franchisee can indeed be the fast track to success.

What is a Franchise?

What is a franchise? A franchise is a right granted to an individual or group to market a company's goods or services within a certain territory or location. Some examples of today's popular franchises are McDonald's, Subway, Domino's Pizza, and the UPS Store.

There are many different types of franchises. Many people associate only fast food businesses with franchising. In fact, there are over 120 different types of franchise businesses available today, including automotive, cleaning & maintenance, health & fitness, financial services, and pet-related franchises, just to name a few.

How Franchising Works

If you are thinking about buying into a franchise system, it is important that you understand exactly how franchising works, what fees are involved, and what is expected of you from the franchise company.

An individual who purchases and runs a franchise is called a "franchisee." The franchisee purchases a franchise from the "franchisor." The franchisee must follow certain rules and guidelines already established by the franchisor, and in most cases the franchisee must pay an ongoing franchise royalty fee, as well as an up-front, one-time franchise fee to the franchisor. Franchising has become one of the most popular ways of doing business in today's marketplace. In most states you cannot drive three blocks without seeing a nationally recognized franchise company.

The History of Franchising

Franchising began back in the 1850's when Isaac Singer invented the sewing machine. In order to distribute his machines outside of his geographical area, and also provide training to customers, Singer began selling licenses to entrepreneurs in different parts of the country. In 1955 Ray Kroc took over a small chain of food franchises and built it into today's most successful fast food franchise in the world, now known as McDonald's. McDonald's currently has the most franchise units worldwide of any franchise system.

Today, franchising is helping thousands of individuals be their own boss and own and operate their own business. Franchising allows entrepreneurs to be in business for themselves, but not by themselves. There is usually a much higher likelihood of success when an individual opens a franchise as opposed to a mom and pop business, since a proven business formula is in place. The products, services, and business operations have already been established.

Advantages of Buying a Franchise

There are many advantages to buying a franchise. Some of these advantages are:

• Corporate image - The corporate image and brand awareness of the company is already established. Consumers are always more comfortable purchasing items from a familiar name or company they trust.
• Training - The franchisor usually provides extensive training and support to the franchise owner.
• Savings in time - Since the franchise company already has the business model in place you can focus on running a successful business.

There is a reason why franchising has been around for decades. It is a great way for individuals to own and operate their own business. If you are thinking about buying a franchise, do your homework, research the company, and you should consult with a franchise consultant or franchise attorney before making a final commitment.

McDonald's Franchise Review

In 1954, Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of the Multimixer, a milk-shake maker. When the 52-year-old heard that the McDonald's hamburger stand in California was running eight Multimixers at a time, he paid them a visit and pitched the idea of opening up several restaurants to the owners, Dick and Mac McDonald, hoping to sell eight of his Multimixers to each one. They struck a different deal, and Ray Kroc opened the first McDonald’s restaurant in 1955. In 1965 McDonald's went public and today is the leading global foodservice retailer with more than 30,000 restaurants, located in more than 100 countries.

Background and Benefits

Who doesn’t know the menu by heart and every jingle ever written? The business model works, and with national and international advertising, McDonald’s Corporation manages to serve 27 million Americans everyday. But while owning a McDonald's restaurant is a tremendous opportunity, the company is seeking individuals with significant business experience who have successfully owned or managed multiple business units and have significant financial resources. McDonald's Corporation claims they are about growing business, making money, and having fun, and only the serious entrepreneur need apply.

How Much does a McDonald's Franchise Cost?

It takes a lot of potatoes to make these fries so come prepared. You will need a minimum of $300,000 in non-borrowed, personal resources to be considered for a franchise. Most Owner/Operators enter the System by purchasing an existing restaurant directly from McDonald’s or from a McDonald's Owner/Operator. A small number of new operators choose to purchase a new facility, but that requires an initial down payment of 40% as opposed to 25% for an existing restaurant. Intensive training addresses all aspects of operating a McDonald's restaurant. While McDonald’s does not offer financing, McDonald’s Owner/Operators have access to the company’s established lender relationships with some of the lowest lending rates in the industry.

What We Like

McDonald’s provides hands on training and the materials you need to become a success. With world-class training, world-class service, world-class support, and unsurpassed name recognition, McDonald’s is a sure winner for franchisees seeking a serious “all-in” franchising opportunity with guaranteed community presence and predictable profits. All this and they still serve a shake so thick you need a spoon.

Pros

• Special Incentive Programs -MinorityFran Participant
• Recession Proof Market - McDonald's serves more than 27 million individuals daily according to 2007 statistics.
• World Class Training - McDonald's is recognized as a premier franchising company around the world. Training is required prior to becoming an owner/operator.

Cons

• Cost - McDonald's does not provide financing or assistance other than the special incentives for minorities.
• No Absenteeism - McDonald's franchises are open only to individuals who are involved with the day-to-day operations of the restaurants-no absenteeism allowed.

The Process of Buying a Franchise

The process of buying a franchise is a very long process that should be pursued very carefully. There are many factors to consider, and many steps to take during the franchise-buying process. The following 5 stages will help you better understand the franchise buying process.

1. Choosing the Right Franchise

This is by far the most crucial step of the franchise-buying process. Deciding which franchise to buy is very difficult since there are thousands to choose from. You should choose a franchise you have interest in, or choose an industry in which you have past experience. Also, you must choose a franchise that is financially right for you. Remember, this will be a life-changing experience, so make sure you make the right choice.

2. Deciding What Franchise You Can Afford

You must remember to ask a lot of questions and find out exactly what your overall investment is. If a franchisor is advertising “$50,000 Initial Investment,” this does not mean that this amount is all you are required to invest. This $50,000 will probably represent your down payment and possibly a part of your franchise fee. There are many other costs involved, including the franchise fee, legal fees, build-out costs, supplies and working capital. Get an overall list of the items that make up the total investment and make sure it is something you feel comfortable with.

3. Steps to Take After You Choose Your Franchise

Once you have decided on a franchise that fits your lifestyle and budget, the next step is to investigate the company. When you buy a franchise you are not only buying a system but you are also at the beginning of a (hopefully) long-lasting relationship. You want to make sure it is the right relationship. Take your time and investigate the company thoroughly. Meet with all of the top executives in the company. Track down existing franchisees on your own and ask lots of questions.

4. Hiring a Franchise Attorney

Anyone who is considering buying a franchise should consult with a franchise attorney. This will help you to make sure you understand exactly what is expected of both you and the franchisor. You will do this by reviewing all of the franchise documents with your franchise attorney. It is imperative that you understand all of the terms and all of the documentation up front.

5. Preparing Your Business Plan

If you are borrowing money to buy your franchise you will need a business plan. Creating a business plan will not only help you receive financing, it will also become your guideline for success. Another reason you need to create a business plan when buying a franchise is to set your own personal goals. Any investment you make should always be researched, well thought-out, and follow a certain structure. Creating a business plan will keep you on the right track and help you focus on achieving your goals.

Buying a Franchise is Serious Business (Part 1)

Buying a franchise is a dream for many aspiring small-business owners.

There are conflicting opinions as to whether franchises tend to be more successful than independent small businesses, but this much is clear: Franchises are expensive to buy, carry the same risks as any startup business and require plenty of sweat equity to make them profitable.

"Buying a franchise is a serious, serious business, and one should contemplate the downside," says George Naddaff, chairman of the KnowFat! chain of restaurants, who created franchises including Boston Market and Sylvan Learning Centers. "The danger … is that every franchise is a startup."

Franchising allows entrepreneurs to take advantage of a proven business model and do business under a brand name that already enjoys market recognition and a loyal customer following.

As a franchise owner you will probably get support from your franchisor, which is one advantage over owning an independent business. This often includes access to reputable suppliers as well as operational and marketing support, including national campaigns and regionally tailored promotional materials. But just how much support your franchisor gives and what your investment costs will be are two of the many questions you should ask before buying a franchise.

Do Your Homework

Franchisors must provide prospective franchise owners with the company's uniform franchise offering circular. This thick document details important aspects of the business, such as the number of franchisees, financial statements and litigation history.

You should read the uniform franchise offering circular thoroughly. Naddaff advises calling franchise owners that are listed in the circular to ask about their store financials and their relationships with the franchisor.

Franchisors are only required to provide the circular, which will also outline the services you'll receive for the initial fees you'll pay to the company. Franchisors are not required to provide you with such services as advertising, training or access to financing. The services and relationship with the franchisor depends on each company, but many franchisors will provide these services and more, depending on their policies.

The circular will also tell you about the company's management, an important consideration when buying a franchise. Take a close look at the level of turnover, any recent management changes and the business styles and histories of the top executives.

Know Yourself

You should have solid credit and cash before buying a franchise so that you know how much you can pay for the initial operating costs and fees. You should also know the industries that interest you and why.

Make sure that your personality “is one that fits,” Naddaff says. "Everybody should play to their strengths."

Naddaff has seen many entrepreneurs in their early 40s who turn to franchising because they're tired of the corporate grind or having a boss. But owning a franchise doesn't completely eliminate supervision. Check the franchisor's rules carefully and determine whether you are comfortable with the creative and other restrictions on operating your franchise.

If you already own your own business, you may be an especially appealing candidate, as you likely already have the needed resources in place, including property, personnel and clientele, as well as know-how and a proven track record, which means you can quickly be up to speed and generating income.

However, some franchisors may be wary of getting involved with an experienced business owner who long ago forged opinions and about how best to operate – opinions that may not mesh and might even clash with how the franchisor prefers to do business.

Buying a Franchise is Serious Business (Part 2)

Know the Costs

There are a number of costs associated with acquiring and starting up a franchise.

1. Initial Investment Fees

You will probably need to pay initial fees to your franchisor. The median initial investment cost in 2006 was $25,150, according to the International Franchise Association. About 75 percent of businesses have set initial fees, while 25 percent have ranges for the fees, the association reports.

The National Federation of Businesses says most franchisors expect you to pay one-third of the fees in cash. The rest can be financed through the franchisor or on your own. Franchisors may help you get loans through their financial institutions.

The fee allows you to use the brand name, and often includes training, marketing and other services. The franchisor will determine what exactly the fees cover.

2. Startup Costs

You may still need to buy or lease a property, which is usually the largest cost for franchises, purchase equipment and hire staff. These are traditional startup costs for any small business and can also apply to franchises.

3. Royalty Fees

You'll need to continue paying a percentage of your income to your franchisor for the right to use the brand. This fee can range from 4 percent to 12 percent, Naddaff says, and can also be used by the company to help your store with marketing and promotions or to have corporate site visits.

On its Web guide for buying a franchise, the Federal Trade Commission notes that "even if the franchisor fails to provide promised support services, you still may have to pay royalties for the duration of your franchise agreement." Before buying a franchise, be sure to ask franchise owners about the services and support they've received from their royalty fees.

4. Additional Costs

You'll be responsible for ongoing operating costs such as payroll. You also may have to pay for your own advertising, depending on the services your franchisor bundles into the agreement.

Research the Market

Franchises shouldn't be too young, nor should they be too well-established. If a franchise is either, you may be heading into a risky investment.

"You can be too soon on something or too late," Naddaff warns. "So I try to find things on the cutting edge."

Think American coffeehouses are booming? So do other companies, which is why the market has already been tapped, Naddaff says. He sees more growth in restaurants offering health and ethnic foods.

Find out what's missing in your community and how similar businesses are performing in comparable communities.

Franchising Your Business

Franchising your business can be a great way to grow your business. When you franchise your business, you basically sell your product, name and way of doing things to others (franchisees) who pay you a fee for the chance to duplicate your success.

But franchising your business takes a fair bit of preparation and is only a viable option for those businesses that are “ready” to franchise. Is franchising your business for you? Ask yourself these questions to see if your business is ready to become a franchise.

1. Is it possible for others to duplicate your success?

Many successful businesses are successful because of the business owner, not the business’s products or services. He or she has the charisma and/or salesmanship coupled with a particular skill set that draws customers and brings them back. If your success is dependent on your own flair and skills, franchising your business is not for you.

2. What’s your unique selling proposition?

In other words, why would people want to become franchisees of your business rather than just doing what you did themselves? There has to be something unique about your product or service or something about the process for creating your goods that’s difficult to duplicate for franchising your business to be profitable. That doesn’t mean that your product or service has to be exotic or ground-breaking. One successful local franchise refills ink cartridges; another hauls junk. It’s the way the process is done or the service is delivered that makes it franchise-worthy.

3. Do you have a system that can be duplicated and monitored?

When you franchise your business, it’s not actually your product or service that you’re selling to others; it’s your system. Franchisees aren’t just buying the right to sell your product or service, but your manual of operations that will allow them to do things exactly as they’ll be done in every other location of your franchise.

The most common kind of franchise is the Turnkey operation. The franchisee expects to be able to walk into the business and run it successfully, as the franchisor provides everything from initial inventory and staff training through accounting and promotion. In other words, when franchising your business, you are providing a blueprint of the operations, training, marketing, financial and legal aspects of the company. Franchising your business is not for start-ups or businesses that haven’t worked out the kinks.

4. Do you have more than one location now?

Deciding to franchise your business when you have only one location is dangerous. Until you’ve “transplanted” your successful business to another location at least once, you won’t know how much of your business’s success is dependent on local conditions. Opening another location before franchising your business will also give you the chance to test the system you hope to franchise and revise your franchising plan as necessary.

5. Do you have the money you need to franchise?

Franchising your business isn’t cheap. Developing your franchise concept will cost you both time and money. Besides the obvious costs, such as getting the expert advice of lawyers, accountants, and franchise consultants to help you put your franchise package together, you’ll also need to market your franchise opportunity. And all of these costs will be incurred before you’ll see any franchise fees roll in from your new franchisees. Financing your franchise expansion will definitely be a important part of your plan to franchise your business.

Is franchising your business for you? Perhaps the best indication of all is whether or not you’ve already had franchise inquiries. Franchising is a very popular choice for people who want to start businesses – especially if the start up requirements for franchisees are $25,000 or less.

If you’ve answered “yes” to the first four questions on this “are you ready to franchise your business” list, don’t let a lack of funds deter you. If you already have an established, successful business and a developed plan for franchising your business, you’ll find traditional financing easy to get. Traditional lenders, just like you, recognize what a profitable investment franchising your business can be.