The dream of being an entrepreneur appeals to many people, but starting your own business from the bottom up can be daunting. Some alternatives deliver many benefits of being a business owner while avoiding some of the drawbacks to starting a business.
By exploring some alternatives, you may be able to find one that will give you the experience you are looking for while minimizing the difficulties of entrepreneurship. If none of them scratch that itch, maybe it is time to roll up your sleeves and build a business from the ground up.
Understanding Alternatives to Starting Your Own Business
Invest in Other People's Startups
Although it may not carry the same attraction, investing in startups and established businesses can be as profitable as running them. Publicly traded venture capital funds scout and invest in startups, creating a portfolio of businesses that might make it big. With a single investment, you can get access to a wide portfolio of businesses that have passed the venture capital firm's tests.
- Active alternatives to starting your own business—those that require some sweat equity from you, but far less startup effort—include intraprenuership, finding partnerships, or purchasing a franchise.
- More passive alternatives to starting your own business—those in which you own a business through investment—include investing your capital in existing businesses, startups, or venture capital firms that finance those startups.
On a local level, there are often opportunities to make direct investments in a business about which you have some knowledge, either in your area or your personal network, that could exchange an equity stake for your investment.
Both types of investments carry a level of risk that matches the potential rewards if a business is successful, so it is important to research these opportunities thoroughly. Investing through a venture capital fund is the most hands-off of these alternatives. You don't have to quit your job, open an office or hire employees—you just buy shares.
Instead of investing in a business in exchange for an equity stake, you can look into becoming a partner in an existing business. This can mean doing day-to-day work in the business—focusing on something the founder doesn't have time for, such as marketing or finance—or it can be a more hands-off role.
This can give you the entrepreneurial experience, minus the start-up phase, and allow you to choose the type of work you want to do. Even if you are absolutely set on starting your own business, the right partner can make the start-up phase go more smoothly, depending on the experience and skills they bring to the table.
Another option is to become an entrepreneur within a larger organization. Some companies have structures encouraging employees to pioneer new business lines in return for equity or bonuses. If you can find a company with a strong culture of innovation, you can build your own business within it, with the advantage of having start-up capital from the beginning and less personal risk.
You may even be able to kick-start an intrapreneurship program by asking to spend a percentage of your time working on pet projects with bonus structures. To bolster your argument, you can point to companies like 3M, Intel, and Lockheed Martin. These companies saw some of their biggest growth when intrapreneurship defined the corporate culture. Intrapreneurship can offer some of the same benefits as entrepreneurship without forcing you to give up the security of a day job.
Buy a Franchise
A business in a box is one way to avoid many of the hassles involved with starting from scratch. Essentially, a franchise owner is following a script proven to be successful in other locations. Benefits of a franchise include a recognized brand, resources to draw from, and economies of scale the franchise network creates.
The drawback to franchise ownership is primarily the cost of the initial purchase and the royalties, which can be expensive. People who want a true entrepreneur experience will also have issues with the limitations the franchise office imposes as far as creative control. That said, franchises have a stronger support network and generally have a better success rate compared with the vast majority of start-ups.
Buy an Existing Business
Buying a business that is already in operation and profitable is another shortcut. There are some obvious benefits, like less time spent in the planning and creation stage, infrastructure such as supplies already in place, and existing customers who recognize the brand.
The major downside is that the cost of acquiring a profitable business is usually much higher than the start-up costs of the same type of business. This cost reflects the efforts of the person who started it, plus an additional premium charged for the business having proven its viability.
If you choose this route, it is important to perform due diligence, such as confirming all the revenue figures and finding out why ownership is selling a seemingly successful business.