Information from the Washington State Department of Financial Institutions

Questions To Ask Before Investing In A Business Opportunity

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Before you invest, whether it is in a franchise, multi-level marketing program or other business opportunity, there are many things you should consider.

The following is a guide to some of the questions you should ask yourself. Go over these questions carefully to help make your decision.

Your Investment

  1. How much money do you have to invest?
  2. How much money can you afford to lose?
  3. Will you operate alone or will you have partners?
  4. Will you need financing? How will you obtain it?
  5. Do you have savings or income to live on while you start your new business?

Your Knowledge and Skills

  1. Are special skills or education required?
  2. Do you posses these skills or can you easily get them?
  3. What specialized knowledge or talents do you bring to the business?
  4. Do you have the necessary skills to manage a business?

Your Goals

  1. Do you require a specific level of income?
  2. Is this a new field of interest?
  3. Do you like sales or performing a service?
  4. How many hours are you willing to spend on your business?
  5. Do you want the day to day management of the business or are you going to hire a manager?
  6. Will this be your primary source of income or a supplement to your present income?
  7. Is this something that you will enjoy doing for the next 20 years?
  8. Are you interested in staying small or do you want to grow large?

Making Your Selection

Investing in a business opportunity is like any other investment, there are risks. As you narrow down your possibilities, carefully consider these factors.

  1. What is the background of the promoter?
  2. What is the level of support you will receive?
  3. Have you talked to other owners?

Demand

  1. Is there a demand for the product or service?
  2. Is it seasonal?
  3. Is it a fad?
  4. Is the product or service a one time shot, or will it generate repeat business?
  5. Even though it may be the greatest thing in Florida, will it work in Washington?

Competition

  1. Is there competition, not only in your immediate area, but nationally?
  2. Are there other companies offering the same products or services?
  3. Will you be competing with well-established businesses with name recognition?
  4. What will set you apart from them?

Your Ability to Operate a Business

  1. Will you be able to operate if the promoter or parent company goes out of business?
  2. Will you be able to purchase supplies?
  3. Can you run your business alone without extra personnel?

Name Recognition (Franchises or Multi-level Marketing)

The main reason for purchasing a franchise or multi-level marketing program is the right to use the company's name. The more successful the franchisor or multi-level program, the more the name will be recognized.

  1. How widely recognized is the name?
  2. Is the name and/or logo a registered trademark?
  3. How long has the parent company been in business?

Company Reputation

  1. What is the company's reputation for services, products?
  2. Are there any complaints on file against the company with the Better Business Bureau or a local consumer protection agency?
  3. Are there any complaints on file with the Washington Department of Financial Institutions?

Training and Support Services

  1. Does the company offer training or ongoing support services?
  2. How does the training compare with other similar training?
  3. Will you be competing with others with more training?
  4. What are the backgrounds of the current franchises or business opportunity owners?
  5. Do they have prior technical or special training that is enabling them to be successful?