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Managing growth can be as taxing to a small business owner
as managing employees. Any type of growth creates change in the company and
brings to the fore different financial, managerial and legal challenges that
increase risk.
Nevertheless, most entrepreneurs aspire to build their small
business. Some are interested in expanding their existing markets, whereas others
want to enter entirely new markets. Which type of growth will be right for you?
If your goal is to achieve sensible, logical growth, you’ll want to balance
your expansion plan with flexibility. Otherwise, you’ll miss out on promising
market opportunities and will be less adaptive to changes in the marketplace.
Franchising, licensing and distributorships or dealerships are three possible
ways to grow an already healthy small business.
Franchising is an option for some product and service
companies that are not in a position to finance internal growth. Franchisees
are sharing the risk of expanding market share, because they are committing
their own capital and resources to model satellite locations after the existing
business. However, there are a host of state and federal regulatory issues
around the offer and sale of a franchise. Too, sufficient capitalization is
only the beginning of a solid foundation from which to launch franchises.
As with franchising, licensing enables a business owner to
spread the risk and cost of developing and distributing a product. However,
licensing typically falls into two categories: intellectual property, such as
computer software and high technology, and merchandise and character licensing,
having to do with trademarks and images. In the second type, the name, logo,
symbol or character is the “property,” whereas the actual product (a toy, for
example) becomes the “licensed product.”
One way to bring a manufactured product to the marketplace
is through independent, third-party distributorships and dealerships. A
distributor buys the product from the manufacturer—your small business—at
wholesale prices and will be reselling either to a retailer or directly to
customers. Your controls over the dealer must be minimized to avoid the
business’s being included in the category of a franchise, which entails more
complex regulation beginning with a disclosure document.
Whichever form of growth you select will have specific legal regulations and some variation in the amount of control you will have over the other party. To learn more about these and other vehicles for growing your business contact the Greater Binghamton SCORE® Chapter 217 for assistance call 607-772-8860 or 1-800 -920-6972. You may also contact SCORE® for person to person counseling appointments at the above telephone numbers. If you are already in business onsite assistance is also available.