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Franchise v. Home Start-up: Which Works Best in Recession

Buying a franchise or embarking on a home business opportunity both have their advantages and disadvantages which will be determined by factors like:

How much money you have to invest?

How much time you have to dedicate to your business?

How confident are you in your own ability to manage and grow either business approach?

On the investment side, with a franchise you can get started from anywhere from $15,000 to in excess of $1,000,000, based on how much you can borrow.

A home-based business can be started for significantly less – if you have existing skills and know your existing market well.

Generally, franchises may work best if they are tried and true business concepts that seem resilient in economic downturns. Franchises also can give you valuable marketing and business insights into businesses you do not know.

Home-based businesses have low start-up costs if they are for a business or hobby you know well – but are not recommended for entering an entirely new field. For example, if you are an actuarial accountant, starting a consulting firm in your home would take relatively little time. Going into the barbecued chicken business is a different proposition altogether and should tilt your toward franchises.

The franchisee's customer base is largely determined by the geographical area allocated therefore exposing her to the vagaries of factory shutdowns, general layoffs, extreme weather, fires, floods, drought and tornadoes, which affect the general economy. If a region suffers from any of those negatives, then so will a franchise. People scale back their spending but the franchisee is still servicing the debt, paying the rent and has employees it is responsible for while all the while paying out royalty and marketing fees to the franchisor.

With a franchise you already have a set system to follow, an advantage if you don’t know the business well. And you may also benefit from the franchise brand name and franchise marketing and list services.

With a home business opportunity you do not have a template from which to work, but you are free to make changes as the need arises. If you are not an expert in the business form the start, you can find help from many of the home business entrepreneur web forums. But you will also have to form your own marketing plan and work on sales.

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