TH2003

Types of Business Ventures

In starting a business venture, an entrepreneur must be familiar with the types of businesses to know
what suits him/her the best. There are three (3) types of business based on management: Start-up
business, Franchising, and Acquire (Buy-out) business:

Start-up Business
A start-up business is the kind of business that is just about to be put-up or just starting. This usually starts
from one (1) or two (2) or more entrepreneurs wanting to build their own business or venture. This type
starts with the desire to meet the need of producing a product and service the entrepreneur/s believes
to be in demand. This usually tries to focus on a small market or a specific one.

Independent business is creating more profits and survives the market for a longer time. (Welsh & Davis,
2017). Since this business focuses on a smaller market and tries not to compete too much, generating
more profit is easier. They are also surviving the market for a longer time since they can generate more
products or provides new services along the way of operating the business.

Start-up businesses are starting to gather a larger interest from people, whether the purpose is just to
earn or survive hard times. Online selling is one of the existing kinds of start-up business these days, where
an entrepreneur tends to sell a variety of products, may it be food, clothes, and emerging necessities –
anything in demand. From one main goal of sustaining a need, people are bending to become
businessmen. This start-up business can either be managed solely by partners or a corporation.

There are various types of start-up firms (Barringer & Ireland 2019):
• Salary-substitute firms – This type of business will give the same level of income to the
entrepreneur/s as what they are getting from a conventional job or employer without spending
the whole day working. This type focuses on those usual products and services people need that
are easily accessible or available. Some salary-substitute firms operate for a particular day or with
a specific time in a day or producing product/s or service/s but are patronized by the market and
able to equate or exceed the salary compensation of a supposed to be earning from a usual job.
Let us say those who are selling snacks or pastries in a day for just an hour or two but earning like
what an 8-hour worker does.

• Lifestyle firms – This is the type of business established because of the longing to pursue a certain
lifestyle and earn from it. Some examples are those who facilitate or own tour guiding activities
and facilities, cooking, or baking. This lifestyle kind of business employs the owner promoting his
hobby or pastime, anything that they are fond of doing.

• Entrepreneurial firms - This one is the kind of business that aims to bring new products and
services with value making the most of every opportunity with whatever resources are available.
The social media sites or applications that promote jobs serve people a wide range of help in easy
and accessible job hunting. Entrepreneurial firms usually used this partnership to know their full
potential to become successful by growing their operation.

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Franchising Business
Franchise means privilege or freedom. This is the type of business where two (2) individuals or partners
agree to a venture. The franchisee will pay the franchisor, the rightful owner, that allows the franchisee
to use their trademark to sell the product, service, and/or business they are known for.

Franchising business is pursued by those who long to belong in a competitive market and larger industry.
This is known to many entrepreneurs because of its advantage in establishing and having a known
company brand name. Limited time to do the product naming and marketing as it is already introduced
to the market. (Hayes, 2019)

Ownership of a business that’s already established is a big move. It is not only investing money, but time
and effort to share a product, service, and/or business an entrepreneur believes to be worth it. Less time
to think of a brand name and marketing strategy is a good start. Maine Mendoza, a known actress and
commercial model in the Philippines, is also an entrepreneur. She started being the face of the known
fast-food restaurant, McDonald’s, and now a franchiser. As a start-up business, franchising can be under
a sole-proprietor, partnership, or corporation.

There are two (2) types of franchise system:

• A Product and Trademark Franchise - This is the franchise where the franchisor guarantees the
franchisee to buy its product and use its trade name. Tracing back previous lessons regarding
intellectual property, a trademark is the exclusivity of a business toward a product, service, and/or
business. One example is the SMB Travel and Tours, a travel agency that’s already operating for
six (6) years and is known as one of the top wholesalers of airline tickets, as well as Asian and
Philippine tour packages.

• Business Format Franchise - This is the kind of franchise that is widely used by entrepreneurs
where the franchisor aids the franchisee in training and advertising to let his/her business grow.
Here are some of the industries belonging to the tourism and hospitality industries that use this
kind of franchise. (Barringer & Ireland, 2019)
o Commercial and Residential Service
o Lodging
o Quick Service Restaurants
o Real Estate
o Retail Food
o Retail Products and Services
o Table/Full-Service Restaurants

Acquiring (Buy-Out) Business

This goes with big companies, as buy-out means acquiring the controlling interest in a business. The word
acquisition is being used to exemplify the biggest right acquired of an individual to make large decisions.
(Barone, 2020). This type of business is established through a right obtained by an individual within a
company that allows him to take over or make major decisions. This happens when an individual within
the said company owns more than 50% of it.

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Buy-out happens when a buyer sees that a company can improve under new ownership and control, and
most of the time, this is only pursued if the acquiring buyer or party believes that there will be a good
return of investment. Once the acquirer formally talks to the board of directors regarding his intentions
to take over the said company, this takes effect.
There are two (2) types of buy-outs:
• A management buy-out happens when a company acquires the biggest part of the company from
a private owner or parent company. This sometimes happens when an owner of a private
company decides for his retirement. Those people with high ranks often take this opportunity as
there is a greater return in being the owner.

• A leveraged buy-out happens when the buyer or purchaser controls a company with their assets
through bonds or loans. This allows the buyer to acquire the company without the need for a large
amount of money; without investing too much, the ownership is being obtained.

Misconceptions About Business Ventures

Many people aspire to become a businessman. There is a lot of advice that can get or receive to start a
business. However, assumptions are also inevitable. Building a business gets a lot of interest and the
conclusions, one of which is that having a venture is an immediate success. This conclusion often happens
after the first week of starting or even during the development of a business. The following are
misconceptions about business ventures:

• Business is a safe investment - This misconception often attracts entrepreneurs to push through
starting one without even thinking of any possible drawbacks. They spend money to let their ideas
happen. However, business is a risk, and people can either lose or win along the way. The money,
time, and effort laid by an entrepreneur can be a total waste depending on how the market sees
it.

• The business ensures success - This assumption often creates disappointment and
discouragement to many starting entrepreneurs because they think that doing business is an
assurance of success. But like any discussions regarding drawbacks encountered in entering a
business, success only happens with continuous assessment of the venture. Keeping an eye on all
the aspects related to it and making accountable actions for every possible change and
development can be an entrepreneur’s way to success.

• Business grows rapidly - A lot of aspiring entrepreneurs think that business rapidly grows that
they are becoming eager to create a business after business. Sometimes, this same mindset stops
most of them after not seeing expected results. But business is a process, and its growth is a step-
by-step journey. An entrepreneur must accept that there is no shortcut to the desired growth.

References:
Barringer, B.R. & Ireland, R.D. (2019). Entrepreneurship: Successfully launching new ventures (6th ed. Global ed.). Pearson.
Barone, 2020. Buy-out.
https://www.investopedia.com/terms/b/buyout.asp.
Franchise.PH (2020). Travel agency franchises.
http://philippinefranchise.com/travel-agency-franchises/.

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