The pros and cons of buying a business versus a franchise with Melinda Emerson

Buying an existing business or franchise can offer entrepreneurs a faster path to revenue and growth than starting from scratch. On the latest episode of The Small Business Show, Melinda Emerson, CEO of Quintessence Group and America’s top small business expert, shares the advantages, disadvantages, and key considerations for anyone thinking about acquiring a business or franchise.

With 40% of U.S. businesses expected to change hands in the next five years as baby boomers retire, opportunities abound for aspiring owners. Banks and lenders typically favor businesses that already generate revenue and have established customer bases and employee teams, making financing easier. Franchise companies also often provide specialized financing for new owners.

Emerson highlights five key sectors in franchising that continue to experience growth:

• Health and wellness
• Education and training
• Elder care
• Pet care
• Food

Despite these opportunities, thorough due diligence is essential. Prospective buyers should understand why the current owner is selling, evaluate any existing debt, and assess the potential for growth. Retaining the previous owner for two to three years can also help transfer client relationships, contracts, and operational knowledge.

"Buy a business that has the growth potential."

Owner financing is another option, allowing buyers to acquire a business with minimal upfront capital and make payments over time. Entrepreneurs can also leverage retirement funds to finance a purchase. Unlike startups, which can take years to stabilize, an existing business provides immediate cash flow to support loan repayment and ongoing operations.

Finding the right business often requires research and patience. Brokers and online marketplaces can help, but the best opportunities often come from local businesses that are not officially listed. Prospective buyers should also carefully consider their skills, lifestyle, and readiness to manage operational demands before making a commitment.

With careful preparation, strategic financing, and diligent planning, entrepreneurs can reduce risk, accelerate profitability, and take control of their careers.