What is a “Business-in-a-Box”?
In an era of an increasing number of options for the aspiring entrepreneur, a new class of businesses have emerged that can be classified as a “business-in-a-box”. These businesses are distinct from traditional franchises such as McDonald’s, multi-level marketing platforms such as Amway, or gig economy workers for companies such as Uber. The business-in-a-box concepts are worth evaluating as they present unique opportunities and challenges for the entrepreneur.
A business-in-a-box allows entrepreneurs to participate in a proven concept, leverage skill sets or knowledge, work on a flexible schedule, and take advantage of other services such as marketing, branding, legal, payment processing, and accounting. As compared to traditional franchises, the startup costs are often much lower. This is largely due to the cutting out of the expense of real estate and leveraging technology. However, these concepts are likely not going to command the market value that a traditional franchise could command when sold. In contrast to multi-level marketing, the concept is not designed around recruiting other entrepreneurs for a share of their income.
One example of a growing industry for business-in-a-box concepts is childcare and early childhood development. Several players have emerged in this space such as Wonderschool and WeeCare that help professional caregivers and teachers setup their own home-based childcare business. These companies offer services such as helping the business owner obtain the necessary credentials, meet regulations, launch a website, manage enrollment, and gain access to a larger community. In exchange, the owner is required to pay a percentage of sales. Another example of a participant in this space is Tinkergarten, that gives individuals the ability to offer lessons centered around outdoor, play-based learning.
The most important question to ask prior to signing up for a business-in-a-box concept is centered around customer acquisition. Do the parent company supply the customers or is the business owner responsible for customer acquisition? There is no exact answer to this question as business-in-a-box concepts come in many varieties. However, this question can have an important impact on the earnings potential for the business owner. If the business owner supplies the customers, the earnings potential is unlimited. However, if the customers are supplied to the business owner, the earnings potential can be limited (making the earnings potential close to that experienced by a gig economy job).
For example, concepts such as scooter rental services Bird and GOAT supply the customers via their App, but the business owner is responsible for upfront costs of purchasing the scooter, managing them (i.e. charging and repairs), and handling permitting with the local governments. The tutoring service VIPKid supplies the students seeking English instruction to the US-based tutors. The online course platform Udemy gives their independent instructors the ability to market their courses (they take 3% of sales) or if they do it for them (they take 50%).
Similarly, many other concepts require their owners to supply the customers. Other online course platforms, such as Podia and Teachable, do not offer the ability to market course and the business owner receives close to 100% of sales (less a monthly fee to use the software). Other examples include Substack that supports writers that offer paid newsletters, Robin Autopilot that allows landscapers to utilize robots, Alice’s Table that helps women host flower arranging workshops, and general event platforms such as Run the World and Hopin.
There are many other considerations when evaluating a business-in-a-box concept. Besides the possibility of the cost and risk of customer acquisition, the business-in-a-box entrepreneur will assume most of the operating risk of managing the on-going business operation. There are little barriers to entry to other entrepreneurs opening the same or similar concepts in the same marketplace. The business owner will also lose control over some aspects of the business such as pricing. Lastly, some parent companies might require exclusivity prior to signing on the business owner.
Overall, the business-in-a-box concepts represent a novel opportunity for certain entrepreneurs looking for a proven concept that offers focus, flexibility, and speed to market. If executed successfully, these business models can allow the entrepreneur to create value, while mitigating risk. With the continued rise of technology, these types of businesses, and their economic impact, will only continue to grow.