Evaluation of a Potential Opportunity
We have provided a list of things to do in order to make sure you choose a venture that is right for you and makes a good investment. Before you sign a contract with the seller, it is important to make sure that all of your bases are covered. Here are some ways to protect yourself Potential Opportunity.
Get legal representation
When you negotiate with the licensor-seller, your attorney should be there. Your attorney should review the contract to buy the business opportunity. He or she should also advise you on whether you should sign it as is. Your attorney should explain each part of the contract to ensure you fully understand what you are signing.
Your accountant should review the financial statements of the licensor/seller. Your accountant should also be able check the financial health of the company to determine if it is worth your investment.
You can conduct your own survey to find out the opinions of other business owners who have been offered business opportunities by the parent company.
Are they satisfied with the company? Was the company able to deliver on its promises? Are you a good partner? Is it available to help distributors? Is it sending out advertising materials? What are their thoughts on the opportunities strengths? Would they buy another unit if they could do it again? They would advise you to purchase a unit.
Get in touch with your competitors.
This will confirm the company’s industry standing. You will be able to quickly see the weaknesses of a competitor company. The business opportunity will also be evaluated in terms of pricing.
Verify the credit rating of the seller. This can be done by your accountant or person who audits the business opportunity.
Make sure that you fully understand what you are signing.
Please read the disclosure statement, purchase agreement, and advertising bulletins.
Verify the credibility of the parent company.
To be credible, the parent company does not have to be large in dollars. To determine if a company is credible, use your common sense and seek out advice from trusted people. Small companies can be a great investment because you will have direct contact with the president and other top executives. They will be working with and training you. This is a huge advantage over working with someone five to six rungs below you who might be doing a job. Do the sellers really care about you? Are they sincere? Did they thoroughly check you? Do they care about the type of buyer who will be wearing their banner? This is crucial. If they are only interested in your money, it is a problem.
What the Disclosure Statement Says
A disclosure statement is a document that explains everything about the business opportunity as well as the seller’s company. The disclosure statement includes information about the promoter’s financial health, the number of operating units, and what total fees you will be required to pay. This disclosure statement serves two purposes: to protect licensees and the licensor, and to eliminate unscrupulous licensers.
It is important to detail the history of the parent company. This should include information about the business and identity of all persons associated with the licensor, including whether they have been involved in litigation or whether any of their officials have declared bankruptcy.
Obligations of licensee
Specify any financing arrangements. It should be clear if you will be required to purchase from any supplier. In the disclosure statement, it also explains what equipment, ongoing services, and training will be provided by the parent company.
The promises of the licensor.
This must include the details of whether you are obtaining an exclusive territory or area as a licensee. This section should identify any trademarks, service marks or trade names, as well as logo types, commercial symbols, and patents that you will be able use as a licensee.
Obligation to the licensee
This will tell you how you will be involved in the operation of the business opportunity. It must also be indicated if this is an absentee-business. It should be noted if the licensor requires that you personally manage the business. The licensee may place restrictions on the goods and services it offers. There are provisions for termination, renewal, repurchase, modification and cancellation. You will also need to see the addresses of current licensees so that you can contact them.