By Marshall Reddy
For the prospective small business owner, franchises are a great avenue to consider. There are many benefits to owning a franchise and thousands of people purchase franchises each year. In fact, the Franchise Times, a leading franchise news source, reported that nearly 12,000 franchise units are sold per year. In general, franchises have a better track record of surviving and thriving after they are purchased, but actually opening their doors is an entirely separate issue. According to a report by the Franchise Times, thousands of franchises are currently listed as Sold But Not Open (SBNO). The reasons for SBNO’s vary, but more often than not, a lack of knowledge and unrealistic expectations can cause new franchises to become stagnant. Prospective franchise owners can make knowledgeable decisions and mitigate slow starts by considering the following points.
What is your exit strategy?
Failure should be an option. What will you do if you purchase a franchise and it doesn’t work out the way that you thought it would? Or, even better, what will you do if it works out better than you thought, your sales go through the roof for a couple decades, and then you decide to sell the business? The fact is your time to exit your business will come by choice or by circumstance. Soon-to-be business owners, especially those considering the purchase of a franchise, should plan, in as much detail as possible, what an exit looks like when the time comes by choice or by outside influences.
Short-Term & Long-Term Finances
What do you need to survive for the next six months? Two years? Five years? Twenty years? What are you and your family willing to do if you don’t have as much money as you do now? How long will you wait it out before considering an exit if things don’t work out? These are all questions that you must ask, and make sure your family is on the same page with you when it comes to finances. Starting a business is risky, but it can also be extremely rewarding. Have tough conversations about personal finances before you must have them.
Wants Vs. Needs
Consider your family’s needs and your wants. How much money do you want to earn and why do you want to earn it? It’s perfectly normal and, likely, necessary for small business owners to want to be financially independent. But the reality of owning business is that it the first several months may not yield very much income for you. Owning a business is an investment of your time and money. You must have both to do it effectively and make your wants become a reality.
Where’s Your Passion?
Is your passion going to be the business itself or what the business can do for you? In other words, is your desire to establish a business and eventually collect a paycheck each month or do you want to be actively involved in your business every day? Many franchise owners experience burnout in the early stages of their business because they believed they wouldn’t have to work in the business as much as they do. Managing expectations and the amount of work required to grow a franchise to a high level of self-sufficiency can take many years in some cases. Your two greatest assets in business ownership are time and money. Set your expectations based on the time you are willing to devote in the business, the amount of money you have to hire other experts to grow your business, and the requirements of the business you are considering purchasing.
One of the greatest stressors in business ownership is staffing. You will not be able to prepare for every staffing issue before it occurs, but you can discover your tolerance for managing other people within your business before you make a business purchase. One of the key benefits of purchasing a franchise is that the business model is, in most cases, already developed. If you do not like the idea of working with a large team of people, then stay away from franchises that require many employees to stay afloat. There are hundreds of franchise opportunities that require few or no additional employees to grow to the next stage in business.
Discussions about money are rarely simple, but they don’t have to be stressful. Eliminate stress before you decide to purchase a franchise by first considering how you’ll pay for it. Do you have cash on hand or are you hoping to finance all or some of your business? What equipment purchases will be required? Will you need to purchase vehicles? How much inventory will you need to purchase? Hard costs will require real money. Where you’ll get that money should be something you consider before getting serious about purchasing a franchise.
What Does Growth Look Like?
What do you want to gain from purchasing a franchise? Goals are never achieved if they do not exist. Spend some time thinking about what you hope to accomplish, even what you want your legacy to be, before you purchase a franchise. Ask yourself big questions:
- What are my personal values and which business opportunities will allow me to live out those values?
- Do I want to work in this business until I retire or do I want to get out sooner?
- How big is too big?
- How slow is too slow?
- What will make me happy?
These fundamental points to consider should be common, but all too often, they are overlooked. Spend some time discovering what drives you and what will ultimately shape your business before you purchase a franchise. Doing so will help you avoid a slow start and other issues that often plague new franchise owners.
For more information about owning a franchise or for help discovering if franchise ownership is right for you, contact Marshall Reddy at Franchise Florida, America’s local, trusted franchise experts. Call 904-248-1820 or email firstname.lastname@example.org.