Evaluation of a Potential Opportunity
We’ve provided a checklist to make sure you select an opportunity that is suitable for you and makes an effective investment. Before signing any contracts with potential sellers, it is essential to make sure all bases are covered. Here are some ways to protect yourself Potential Opportunity.
Get Legal Representation
When negotiating with the licensor-seller, your attorney should be present. They can review the contract to purchase the business opportunity and advise whether you should sign it as is or alter it. Your lawyer should explain each part of the contract so you fully comprehend what you’re signing.
Your accountant should review the financial statements of the licensor/seller to assess if it’s worth investing in or not. They can also check on the overall health of the company to gauge its viability as a going concern.
Conduct your own survey to gain the opinions of other business owners who have been presented with opportunities by the parent company.
Are they satisfied with the company and its ability to fulfill promises? Is your partner available for support, helping distributors out, sending out advertising materials? What are their opinions of the opportunity’s strengths? Would they purchase another unit if given another chance? They strongly recommended purchasing a unit.
Connect with Your Competitors.
This will validate a company’s industry standing. You’ll quickly recognize any weaknesses of a competitor company. Furthermore, pricing should also be taken into consideration when assessing an entrepreneurial opportunity.
Verify the credit rating of the seller. This can be done through your accountant or someone who audits business opportunities.
Make sure that you fully comprehend what you are signing.
Please carefully read the disclosure statement, purchase agreement and advertising bulletins before making your decision.
Verify the reliability of the parent company.
Credible parent companies don’t need to be big in dollar terms. Use your common sense and ask trusted people for advice when investing in a small company; you’ll have direct contact with the president and other top executives, working together and training you – an advantage over working with someone five to six rungs below who might just be doing a job. Does the seller really care about you? Are they sincere? Did they do a thorough check on you? Most importantly, are they interested in who will wear their banner? If only interested in your money, there could be cause for concern
What the Disclosure Statement Says
A disclosure statement is a document that details all relevant information about both the business opportunity and its seller. It contains details such as financial health, number of operating units, and fees you will be required to pay. This disclosure statement serves two purposes: it safeguards licensees and the licensor from unscrupulous licensers; additionally it helps eliminate potential scammers.
It is essential to provide the history of the parent company, including any litigation or bankruptcies they have had. This should include information regarding all business activities and personnel associated with the licensor as well.
Obligations of Licensee
Be clear about any financing arrangements. Make it abundantly clear if you must purchase from any supplier. In the disclosure statement, it should also be specified which equipment, ongoing services and training will be provided by the parent company.
The promises of the licensor.
When applying for a license, it is essential to include details regarding whether you will have exclusive territory or area access. This section should identify any trademarks, service marks and trade names as well as logo types, commercial symbols and patents that you will be allowed to utilize as a licensee.
Obligation of the Licensee
You must indicate your involvement in running the business opportunity, whether it is an absentee-business or requires personal management. Furthermore, the licensee may place restrictions on what goods and services it provides as well as provisions for termination, renewal, repurchase, modification and cancellation. Lastly, make sure you get contact information for current licensees so you can reach them easily.