A franchise is a business model the owner of a business concept also known as a franchiser grants the right to use the concept to another party also known as the franchisee. This model is advantageous since it helps reduce the risk involved in starting a new business. Research shows that only 10% of new businesses are still operational three years after they are started (Pease 9). Most of the businesses that fail do so because the owners have to undergo the business’ specific learning curve. When a person franchises they are able to reduce the curve greatly.
A major advantage of franchising is the marketing the franchisee’s business gets from advertising campaigns by the franchiser. Also, the franchiser is readily available to help the franchisee formulate effective marketing campaigns; this gives the franchisee an advantage over other starting businesses (Sherman 167).
A franchise is also advantageous as it gives a new business owner access to a well researched business concept. When starting a business, a significant portion of funds is allocated to business research. Franchising helps reduce these funds by providing the researched and tested data and business philosophies. A franchise is also advantageous since the franchisee get’s to use the management team of the franchiser which increases the possibility of success. The franchise also benefits the franchisee by allowing them access to a network of peers which normally comprises of other franchisees. Through such a network the franchisee can discuss market trends and emerging management practices that will their business.
Reasons why Businesses’ have a Code of Ethics and its Significance
A code of ethics ensures that a business makes market and legally acceptable decisions in all levels of its operations. The code of ethics ensures that the business does not breach ethical behavior since this can have serious consequences in how the business relates to the market, consumer, and government authorities. By developing a code of ethics, the business ensures uniformity in adhering to ethical behavior through out the organizational structure.
It is advantageous when a business has a code of ethics as it helps promote the business’ reputation amongst its peers, its clients, in the market, and with the government. A code of ethics is also important in defining the level of interaction between the business and its external stakeholders. Since market trends are incorporated in formulating a code of ethics, this document helps the business integrate these trends and other beneficial market practices in its managerial, human resource, marketing, and operation functions. This consequently improves the efficiency of the business giving it a competitive edge in the market.
Why Some Entrepreneurs and Small Businesses fail
Most entrepreneurs that fail do so because they overlook integral aspects of starting up a business for example market research (Pease 116). Since these aspects do not yield cash returns directly, most of the entrepreneurs that fail consider them as necessary. This consequently leads to the failure of the entrepreneur’s small business due to lack of vital information about the market and emerging trends. Also, some entrepreneurs fail because of over-investing in fixed assets while starting the business instead of concentrating on building their brand first. This over-investment means that the entrepreneur has little capital left afterwards to invest in comprehensive marketing campaigns and in developing their brand.
Some small businesses fail because they are started for the wrong reasons. The most common erroneous purpose for starting a small business is to generate a lot of money. Other reasons include the desire by some employees to start their own ventures so as not to be answerable to anyone. Since most of these reasons normally do not get met within the initial three years after starting the business, the business owners give up on the ventures consequently leading to their failure.
Lack of management skills is another reason why some small businesses fail. This is because some new business owners lack the required management knowledge to effectively lead their business in areas such as selling, finance, production, accounting, and human resource management. This is why it is important that before starting a business, a person should invest in short-term managerial course to equip them with the required skills of learning their own business unit.
Small businesses may also fail due to lack of sufficient capital. This means that the businesses lack adequate operating capital when they start up which leads to their failure. In such situations the small business owner either underestimates the capital required while starting up their business or assumes that once the business starts it will have enough cash flow to support its business operations.
Some small businesses fail due to lack of proper planning. Most of these businesses lack a strategic plan which is critical in ensuring the future success of a business. Areas where most small businesses that fail lack proper planning in include its human resource needs, description of the goals, visions, and missions, its financial requirements, and its marketing needs.
Importance of Small Businesses
Small Business Units are important in that they are able to give their customers personalized services and products something which large organizations are unable to do. Also since these businesses are close to their market, they are able to acquire first hand information on changing consumer needs and trends (Brue 94). This closeness to the market also helps the small businesses to develop a personal relationship with the market. Since the small business units serve small market segments, they are able to specialize in serving these markets and hence in ensuring the business units are effective in their operations.
Works Cited
Brue, Greg. Six Sigma for Small Business. New York: Entrepreneur Press, 2005. Print.
Pease, Tom. Going out of Business by Design: Why Seventy Percent of Small Businesses Fail.
Chicago: Morgan James Publishing, 2009. Print.
Sherman, Andrew. Franchising & Licensing: Tow Powerful ways to grow your business in any
economy. New York: AMACOM
