Starting a business is a proven path to wealth, and the best way to get there is to start small and scale up.
In 2008, Yuen Yung launched How Do You Roll, a chain of fast-casual sushi restaurants based in Austin, Texas, to fill a niche between expensive, sit-down sushi dining and the often low-quality sushi sold in supermarkets. He started franchising his restaurants in 2010. So far, there are ten franchises and two corporate restaurants in cities throughout the Southwest. He charges a $30,000 franchising fee and a 7-percent royalty fee based on the franchisee's sales.
An ambitious goal is critical if you want to expand your business, says Barbara Findlay Schenck, a small-business strategist and author of "Selling Your Business for Dummies." But persuading lenders that your small business has the potential to succeed isn't easy. Given the high rate of failure among business start-ups, banks are often reluctant to lend to first-time entrepreneurs.
Amy Nichols, who started Dogtopia, a day-care and boarding center for dogs, says obtaining financing was one of the biggest hurdles she encountered early on. Even though Nichols had $80,000 of her own money and pristine credit, she says, "I couldn't get a bank loan to save my life." She eventually got a $70,000 Small Business Administration loan.
Before you apply for loans or sign up investors, polish your business plan and don't overlook sources of free help. For example, you could tap your alma mater's alumni network for potential mentors. You can also get advice from more than 13,000 small-business volunteers through Score, a nonprofit organization supported by the Small Business Administration (http://www.score.org).
To make your business attractive to potential buyers, you should make it transferable from day one. That means maintaining standard financial statements, an operations manual and a diverse group of customers. No single client should account for more than 25 percent of your business, Schenck says.
You also need to develop a brand that someone will want to buy, which means maintaining a strong online presence. Websites such as BizBuySell and BizQuest will give you an idea of the sale price for different types of businesses. Some are more lucrative than others. The median sale price for a software company was $380,000 in 2012, reports BizBuySell, and the median sale price for a florist was $76,500.
(Sandra Block is a senior associate editor at Kiplinger's Personal Finance magazine. Send your questions and comments to firstname.lastname@example.org. And for more on this and similar money topics, visit http://www.Kiplinger.com.)