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May, 09 2011

DIG DEEP BEFORE YOU DIVE

Low-cost business opportunities can be high on risks. Here's a checklist that will help you invest in the right place and avoid some common mistakes made by many.

THE low-cost segment offers varied options to choose from and is an apt proposition for entrepreneurs on a shoe-string budget. But before diving into the low-investment, high-return business pool, watch your steps. Keep these simple but important points in mind before putting your hard-earned money in any low-cost franchise business.

Interest, attitude towards franchising

Many franchisees take up a franchise and then realise it was not meant for them. An entrepreneur needs to have the motivation and attitude of running a franchise, which is not much different from an individual business. A low-cost franchise offers a lucrative opportunity for aspirants but it also requires a lot of motivation and business acumen that may be lacking in some aspirants. Therefore, before investing, it is of utmost importance to judge your attitude towards business.

Scope of concept

Investing in an opportunity because it does not cost much is a common attitude among aspiring entrepreneurs, which can lead to disastrous results. A clear, in-depth study of the low-cost franchise opportunity is quite essential. Entrep-reneurs should know the concept as well as the scope of the concept in their markets. Starting a low-cost service franchise in a market where much service is not required will lead to failure. Select a franchise keeping in mind its scope in the market.

Look for hidden costs

As aspiring franchisees, it is must to research in-detail about investment involved in any franchise. Initial investment, franchise fees, rental money of outlet, developing infrastructure, etc, are few of the investments needed by the franchisee in the beginning. Other expenses like marketing and advertising at local level, paying salaries of employees, taxes, regular royalties to franchisor, etc also have to be incurred by the franchisee. While going in for a low-cost franchise, research about the total investment needed to start the franchise outlet and run it profitably. Many times, the investment can run above Rs 10 lakh, so always do an in-depth study of the concept.

Feasibility of concept

Always find out whether it is practical to start that business. If you need raw materials for the concept, then be sure that raw materials should be easily available in your area. Moreover, the process of manufacturing must be easy to duplicate. Transportation costs can be quite expensive and large distances can spoil perishable goods, increasing your expenses.

Competition in market

Another significant aspect of the selection process of low-cost franchise is to find out the number of players involved in the concept. A low-cost unique opportunity can offer more chances for success as compared to an already saturated concept in the market.

Return on investment

Few of the low-cost business categories make fast business, leading to quick profits, as compared to others. However, there are few concepts which fail and do not make any profits while some concepts give return slowly but steadily. So, as an aspiring franchisee, it is essential to do a study on different concepts and their RoIs.

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