After I exited my first business, a brick-and-mortar bootstrap that grew to several million dollars in revenues, I joined a franchise network, a franchise that sold franchises, and later a business brokerage firm that sold small to midsize businesses.

Navigating the world of intermediaries in business acquisition and franchise development, I discovered a fascinating world of business concepts and the systems that facilitated the transactions between sellers and buyers.

Along the way, I met great people, both in the franchising and brokerage worlds. I also witnessed poor decisions, where buyers led by careless or, worse, unethical agents invested in businesses that turned out to be a poor fit for them.

Like every industry, the world of small to midsize business (SMB) has its share of good, bad, and terrible actors.

Peeking into the heart of these companies through their financials, their secret sauces and the owners’ mindsets gave me clarity as to why some businesses succeed while others don’t.

But also, from my perspective as a business founder and operator of a brick-and-mortar for 20 years, I found inherent flaws in the small to midsize business (SMB) market — flaws that stack the deck against aspiring business owners.

Systemic Bias in the SMB Market

This is especially true for new entrepreneurs who have worked as employees most of their careers and who have a sometimes romanticized view of what it takes to operate a small business successfully.

Here is the problem… The sector of Small to Midsize Businesses (SMBs) has systemic biases.

Business brokers and franchise consultants are only paid when they make a sale. Until that happens, these intermediaries work for free. If a buyer changes their mind or a deal falls through, all those hours of sourcing businesses and franchises are wasted.

When clients do not buy a business or franchise, all these work hours sourcing businesses and franchises are lost.

I remember a discussion with the owner of a brokerage firm when he revealed that he didn’t spend time with buyers because, in his words, “most want-to-be buyers waste time.” His firm’s focus was for his agents to find business owners who were willing to sell their companies so that they could get the listing first.

I was shocked at first, but also realized that it made rational sense.

Similarly, franchisors pay commissions to independent franchise consultants upon successful placement of new franchisees. This is how they expand their franchise network, which in turn grows their revenues through franchise fees and royalties.

As a result, brokers and consultants, by default, work for the sellers and franchisors — not for the buyers.

Flaws in the Business Acquisition Market

While brokers play an essential role in connecting sellers with buyers and ensuring smooth transactions, helping buyers choose the best business for who they are and the life they envision is not their expertise, or their focus.

It is not entirely the broker’s fault.

The assumption is that buyers know enough to exercise due diligence and select the right business for themselves. But I’ve seen too many accomplished professionals with brilliant corporate careers lose money by getting into a business or franchise they didn’t fully understand.

This is another systemic bias. The barrier to entry is low compared to other investment opportunities. Considering that to invest in certain financial opportunities, US financial laws require that investors be accredited investors with a minimum net worth and income and have enough financial knowledge to understand the risks.

The same does not apply when buying a business or franchise, even though the stakes can be just as high. To invest in a for-sale business or a franchise, anyone can leverage and risk their home equity, or even their 401K, to acquire a business or invest in a franchise without fully understanding the risks.

The Realities of Business Ownership

Beyond the question of financial viability, flaws in the business and franchise brokerage world often cause new business owners to regret their choices.

I have witnessed smart and accomplished people who had brilliant careers in corporate get into a business or franchise, not realizing what they got themselves into and losing money.

Some soon-to-be entrepreneurs might be better off building a business from scratch.

Each ownership path — whether building a business, buying an existing business, or investing in a franchise — has its own set of advantages and challenges.

The decision shouldn’t be based on a broker’s or consultant’s recommendation, as they have a vested interest in promoting one option over another. It requires career coaching, life coaching, introspection, and a deep understanding of how the SMB world operates.

Helping Aspiring Business Owners Choose the Right Path

When I realized how the system is stacked against aspiring business owners, I launched Open For Business Lab — a platform designed to objectively serve the needs of aspiring business owners, whether they want to build or buy a business.

Many soon-to-be entrepreneurs are the best fit to create a business from scratch and set their own rules, while others are better served by buying an established business or developing a turnkey franchise.

From these observations and from working with business creators, buyers, and sellers of businesses and franchises, I developed an unbiased business launch formula: Right Business Right Life™ to guide aspiring entrepreneurs in finding and starting the right business without the pressure of having to invest in something.

Our goal is to give people a clear, honest path to business ownership that fits their lives, goals, and resources. One key milestone in our process is identifying the ideal path based on the person’s skills, life purpose, and vision for their future.

Evaluating Your Path to Business Ownership

So, how do you know if a business idea, a for-sale business, or a franchise you are considering is right for you in the short and long term and if you would be better off building a business from scratch or buying one?

Choosing the right path to business ownership depends on your goals, resources, tolerance for risk, and personality. Yes, personality plays a big role in choosing one path versus another.

Below is a table I developed as one of the tools to help my clients gain clarity on how to choose the best path to business ownership. While this table offers a general idea, note that every business opportunity has unique attributes that should be examined on a case-by-case basis.

Pros and Cons of Building or Buying a Small Business

Whether you decide to build or buy, understanding these options helps you make an informed and objective decision.

If you wonder if you should build or buy a business, and which business, let me guide you as your private coach. Together we will objectively research and validate the best business ideas for you to build from scratch or buy.

And if you are already working with a broker or a franchise consultant, perfect! If not, and you want to find one, I am happy to make some recommendations.

They can help you source the opportunities while you and I work together to verify their viability and fit for you, your strengths, and the life you envision.

If you are ready to explore whether business ownership is in the cards for you and what type of business best fits you, I invite you to book a free call with me.