Aaron’s Answers: Should I buy an existing business, buy a franchise, or start my own business?

There are a lot of choices to make when starting up a new venture. One of the things that entrepreneurs have to decide is whether or not they should buy an existing business, buy a franchise, or start their own business. Each one offers advantages and disadvantages that must be weighed.

BUYING AN EXISTING BUSINESS

Buying an existing business is one that has already started; one that has been marketing, selling, and earning revenue from a client-base. It might be in various stages of start-up — perhaps a relatively new company that the founder is selling, or perhaps a well-established company from which the founder is looking to retire and move on.

I think you’re looking for two types of businesses: Either, you’re looking for an established clientele, positive word of mouth, a strong supply chain, good processes, and strong financials that you can buy, walk in on day one, and continue earning profit; or, you’re looking for a business that is currently struggling but has potential to grow.

Compared to the other two options (buying a franchise or starting your own business), you’ll need a comparatively large amount of money up-front to get into this business because it’s established already. But the advantage is, you can potentially start earning an income almost right away (depending on the stage of the business and whether or not the previous owner was active and successful in the business prior to your buying it). Expect to pay more for a healthy company that has existing cash flow.

BUYING A FRANCHISE

Buying a franchise is when you buy a brand and marketing system from a company for a business that hasn’t yet started. This is a nice hybrid model between buying an existing business and starting your own. The business may not be started up yet but you are shortcutting the process with an established and recognized brand, and a business system already in place.

You’re looking for a company that has a strong, positive presence on a larger scale (i.e. in the national market) but has not saturated your marketplace. Look for a franchise that provides support and education and all of the marketing tools you need. Perhaps compare several franchises within the same industry to identify the best one for you.

Expect to pay a franchise fee for the right to use the brand and the business system, and expect to put in time to grow your business. Depending on the franchise, the up-front fee and the ongoing fee could be small or large. If you have some money and some time, but you want a slightly faster start with an established brand, this might be a good option for you.

STARTING YOUR OWN BUSINESS

Starting your own business is the third option. It’s when you create a brand from scratch and build your own business model and products or services.

You really are starting from zero and building it up from there. Not surprisingly, it can take longer to do but many entrepreneurs prefer it because they have the most control over the process plus it generally has a lower “cost” to start.

There are costs, including financial costs, but most of the costs are likely going to be your time. And it might take a while before you establish your brand and start earning money. This is an advantage for people who want to start a business part time while they are working. But be prepared to spend a lot of time! The fail rate is potentially higher with these types of businesses because they can take a while to get off the ground and there is a lower-perceived cost to start them.

SO WHICH ONE IS RIGHT FOR YOU?

The short answer is: It partly depends on how quickly you want to earn money, and it partly depends on how much money and time you have available. (There are other considerations but these are the big ones, in my opinion). If you want to earn money as quickly as possible, buy an existing business; if you have time, start your own business. If you have more money than time, buy an existing business; if you have more time than money, start your own business.

Aaron’s Answers: Should I use a blog or a website in my financial or real estate business?

The Question:

Should I use a blog or a website in my financial or real estate business?

Aaron’s Answer:

Here’s the really basic difference between a website and a blog:

  • A website is like a brochure. You create it once and it stays like that for a while. Sure, you might make some changes over time but in general it has the same content.
  • A blog is like a diary or journal. You add new content regularly to it and people who click to your site will see your most recent post.

If you’re wondering whether you should have a blog or a website for your financial or real estate business, you need to know this: Both are good and it’s okay to have both – a blog AND a website. Don’t think of it as one or the other.

SOME PROFESSIONALS CHOOSE TO HAVE ONE OR THE OTHER

Some professionals choose to have just a website because they want to create the content once and then not worry about it, and then focus on other things in their business. And, since it’s slightly more acceptable to “sell” your services on a website, some professionals prefer that clearer call to action. (Note: They can appear on blogs, too, but generally do so to a lesser degree).

Some professionals choose to have just a blog because their potential or existing clients like reading new content, and because search engines like fresh, authoritative content. Unlike a website, a blog has some relationship-building tools built-in (such as a commenting feature) so you can build a connect with your blog visitors.

SOME PROFESSIONALS CHOOSE TO HAVE BOTH

Some professionals choose to have both – a website at one domain and a blog at another. This gives them the advantages of both.

SOME PROFESSIONALS CHOOSE A HYBRID APPROACH

Some professionals have a website with a blog on it, or they have a blog with elements of a website on it (which is what I have on my site – it’s primarily a blog but there are website-specific elements like a Portfolio page, a Services page, and more).

WHICH SHOULD YOU CHOOSE?

It depends on your sales funnel.

If you have a well-established career with tons of referrals or you’re a face-to-face networking rockstar, then a website might be all you need because you’ll drive people to your site pretty infrequently. If you plan to sell downloadable products, you’ll also want to consider a website because you’ll need sales pages and hidden download pages.
If you want to grow your financial or real estate practice and you want to drive traffic to a site and build relationships with those who visit your site, a blog might be better.
But my favorite is both. You get the clear “sales-focused” calls-to-action that are more acceptable on a website plus the search-engine-loving opportunity to create fresh content and build relationships with your website visitors… and at the same time, you can also dial in other things like product sales.

Aaron’s Answers: Sales forecasting with sales funnel metrics

I received this excellent sales funnel question from a blog reader a couple of weeks ago. I’m posting the question and answer (slightly edited) here because I think it’s a question and answer that every business owner can benefit from knowing. Thanks again for the question!

The Question:
How do you determine if you have enough opportunities in your sales funnel to hit your fiscal year goal?

Aaron’s Answer:
If you know what your average conversion rate is, and if you know what your average per-customer spend is, you should be able to calculate your answer easily.

  • Your average conversion rate is the number of Prospects in your sales funnel compared to the number of those Prospects who actually become Customers. For example, if you have 1000 Prospects and 100 of them become Customers, then your conversion rate is 10%.
  • Your average per-customer spend is the amount of money each Customer spends on average in a given period of time (in this case, your fiscal year). For example, if each of those 100 customers (from the above example) spend a varying amount of money but it averages out to $1000 per Customer in a fiscal year, then your average per-customer spend is $1000.

Here’s what you do next:

Using the above numbers, along with your fiscal year financial target, you are going to do some simple math in order to know how many people need to be in your sales funnel (as Prospects) in order to reach your financial goals.

First, divide your fiscal year financial target by your average per-customer spend to find out how many Customers you need. (For example, if you need to make $100,000 per year and each Customer pays you $1000 in a fiscal year, you know that you need 100 Customers).

Then, divide the number of Customers you need (which you just identified in the above step) by your conversion rate to find out how many Prospects you need. (For example, if your conversion rate is 10%, then 100 Customers divided by a 10% conversion rate is 1000 people needed in your sales funnel).

That’s it! In the example above, if you want to earn $100,000, and each Customer pays $1000, then you need 100 Customers. In order to get 100 Customers, you need to have 1000 Prospects.

If you want to go deeper, you can divide the results you’ve just achieved into smaller goals to get quarterly, monthly, and weekly goals. I think those might be more helpful. And, if you want to grow your business, consider these tips to increase your conversion rate or my popular blog post 99 ways to optimize your sales funnel and grow your business.

Disclaimer: There are other factors to consider: Outside risks (like the economy) can have an impact. So can seasonal fluctuations if you’re measuring in the middle of a fiscal year. Also, your sales funnel’s conversion period can play a role in determining how accurate your numbers are. Every industry is different and these things need to be considered and factored in, even if it’s just as a rule of thumb.

Check out some of my other Aaron’s Answers blog posts. If you have questions you’d like to ask, feel free to email them to me and if I think all of my readers will benefit, I’ll post them here. Don’t worry, I’ll keep your info anonymous.

Aaron’s Answers: How does it all work together?

There are lots of different things you can do online… When do you use them and how do they all work together?

I’ve had three people ask me that same question recently so I thought the topic deserved its own blog post! The people who asked me were a realtor, the owner of a bacon factory (I’m not kidding), and a trainer/educator at my client’s office.

Here’s my answer to them (but slightly generalized for everyone). Now, I should clarify a something first: This isn’t the only way to piece your content channels together, and you can certainly add or take away as necessary. I’m just outlining the basics for someone who wants to get started. I’ve seen this work effectively for all kinds of different businesses.

OVERVIEW
You want to have several different content channels because each one acts as a sort-of “interface” with your prospective market and each one has its own purpose in your sales funnel.

START WITH A WEBSITE
Create a central place to drive your traffic. This site can be fairly static (i.e. you can update the content but you don’t have to do it daily). It should be the place where prospects ultimately go to convert into customers. This can be a somewhat salesy site and acts very much like a brochure and salesperson.

NEXT START A BLOG
Now you need something to showcase just how smart you are while it also works as a search engine optimized magnet of readers. Update your blog regularly — perhaps once a day or a couple times a week.

THEN OPEN AN ACCOUNT ON TWITTER
Open a Twitter account. Tweet daily. Follow your prospects. Listen to them and communicate with them.

THEN CREATE A FACEBOOK PAGE
Create a Facebook business page for your business or brand. Start sharing information about your business. Engage fans. Post pictures and video. Start discussions.

NOW TIE IT ALL TOGETHER
Once you have all four of these content channels created, it’s time to tie them together. Here’s what you might consider:

  1. Put a link on your blog, Twitter account, and Facebook page pointing to your website.
  2. Connect your blog to your Twitter account so you send out an automatic tweet every time you publish a blogpost.
  3. Connect your blog and your Twitter account to your Facebook page so that you gather all of your communication points into your Facebook interface.

Now you have four very different content channels that work together to bring in leads, turn them into prospects, and ultimately into customers. They work together to capture the attention of leads and to convince prospects to buy. In most cases, your blog and your Twitter account will capture their attention. Then your Facebook page and your blog and your Twitter account will slowly convince them that you are the right vendor for their needs. Then your website will provide the way for them to buy from you. (That doesn’t mean they’ll visit your content channels in the exact order I’ve described — they might hop around — but I believe those are the roles that each content channel plays in your sales funnel).

And you can build from here: Maybe you serve a business niche so you want to add LinkedIn. Or maybe there’s a forum where you can post links to some of your sites. Or maybe you serve a local market and want to use Foursquare as a way to get some location-based marketing.

But don’t get too carried away too early. Start with the four I’ve described and build from there!

Aaron’s Answers: Marketing a subscription only site

The Question:

aaronhoos_socialmedia_linkedinNjore J.  KARANJA asked:

I am in the process of creating a subscription-only website. How do I go about marketing it for subscribers, and what is the best payment method?

Aaron’s Answer:

I can’t answer the payment methods but I can help you on the marketing side. Without knowing very much about your site, I’d suggest these general ideas:

1. GENERATING TRAFFIC
* Depending on what your topic is, you might find Google AdWords or Facebook ads to be helpful. Just make sure they are highly targeted.

* I’m still seeing article marketing as a positive way to create traffic… provided that your articles are compelling and high value.

* Start an account on Twitter and use Twellow to help you target people to follow.

2. GETTING SUBSCRIPTIONS
* Build some value on the outside of the subscription gateway so that people can see that you do add value. Offer more (most) of the value on the inside of the subscription gateway.

* Create a free, downloadable report discussing the benefits people can have through the use of your subscription site.

Good luck!

-Aaron Hoos
http://aaronhoos.com

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