Perhaps you?ve been thinking of owning a business for years.? But what holds many people back is fear of the unknown.? They wonder if they will be successful, have the lifestyle they dreamed of, and most importantly, they wonder just how much money they, will really make.
Education and experience reduces fear.? If you were to start your own business there will be many unknowns.? If you buy an existing business, you may be unpleasantly surprised to find skeletons in the closet left by the previous owner. ?So for many, franchising is a preferred way of ownership because it is a proven model that can be taught.? However, the secret sauce is the willingness and the ability of the owner to follow the franchise model. ?You must be able to perform at or above the level of those franchise owners who are making the income you desire.? You will need to look very closely at what they are doing and compare your skill set with theirs.
7 things you must do now that will affect how much money you can make as a business (franchise) owner.
1.)????????? Look inside ? If you want to know how to make a lot of money in your own business you better make sure it will meet your needs at many levels ? personal, lifestyle, and financial.? Most would be owners say they will ?do whatever it takes? to make their business successful.? But if you grow to hate the particular business and it becomes drudgery, good luck trying to grow your business and make a decent return.? Unfortunately, too many people get mesmerized by how much ?potential? money a business may generate and don?t accurately assess if it?s really the best business for them.
2.)????????? Look outside ? Buying a business is a major investment, so why go it alone?? It can be very hard to honestly assess your own strengths and weaknesses.? It can also be very hard to identify a business/franchise that would suit you well, especially when you know practically nothing about the countless ones listed on the Internet.? Here?s where a highly qualified franchise adviser can help ? they can guide you through an entire due diligence process and educate you so you will know how to make the best decision for yourself.
3.)????????? Start at the end point, and then work backwards ? Unfortunately, most people don?t think too much about how they will exit their business, before they purchase it.? The owner invests time and money to grow the business and may not be able to afford to pay themselves a high income during that time.? But eventually there needs to be a return to make the sacrifice worthwhile. This could be monetary but other types of returns are possible.? Some owners want to build a legacy business that will be passed down to family members.? Others may want to use the annual returns like an annuity to fund their semi and eventually full retirement.? Potential owners need to determine ahead of time if the specific franchise they are contemplating acquiring has the potential to eventually produce the desired result when it comes time to exit the business.
4.)????????? Think twice before becoming an owner operator ? Some people may prefer a franchise where they are the only employee or the main employee, essentially performing all primary functions of the business.? If that?s what they want ok, but because they lack the leverage of others helping them grow their business, their earning potential will be capped.? So to, will the value of their company when it comes time to sell.? It is questionable if they will be able to get much more than they bought it for.? The dollars invested in purchasing their business could have been invested elsewhere and potentially growing to a higher value.
5.)????????? Determine how much income you can make? ? Every franchise company is required by law to create a ?Franchise Disclosure Document? (FDD) which is designed to protect the potential investor.? It will describe the investment and expected range of expenses.? One particular section of the FDD, ?Item 19? is an earnings claim.? It is voluntary and some franchise companies disclose and others do not.? One reason some do not disclose this information is because they want to force the potential buyer to conduct their own due diligence with existing owners who normally are quite forthright in sharing all kinds of investment and financial return type of information.
6.)????????? Don?t try and grow your business on a shoe string ? A sure way to jeopardize the amount of money you can make in a franchise is to underestimate the budget needed to grow your business.? An even worse scenario would be to not have enough money to sustain the business.? Unfortunately, this happens way too often and is a major reason why new businesses fail.
7.)????????? Calculate a potential return on your investment ? Passive investments such as stocks are considered to be doing very well if they produce a return of 10% or greater.? However, as a business owner you are investing your time and talent, in addition to your capital, so your return (expressed as a percentage of the total investment) must be significantly greater than a passive investment.
A good franchise with its proven model and supporting systems can provide you the ability to leverage your involvement to realize an acceptable return.
To find the best business to buy with higher return potential, research the average earnings of a typical unit, normally over the first three years of business.? To derive this number, if not stated in the FDD, divide total royalty revenues from all units by the royalty percentage.? Then divide by the total number of franchise units and this will give you an approximation of average revenues per unit.? If you are uncomfortable deriving such information, consider using an accountant or CPA.? They can help you determine:
- A probable total investment range of how much the franchise will cost
- What the business break-even point will be
- Your projected pre-tax income
- The potential return on your investment (ROI)
To learn more about business ownership and explore possible franchises that will meet your needs at many levels, take the next step.
Owning a franchise can be the start of a new and very exciting life, if you conduct proper due diligence on the front end.? Using the services of an expert franchise advisor will help reduce your risk and increase your peace of mind that the investment decision you make is a wise one.? A franchise advisor can also make you aware of franchises you were not aware of or never really knew much about.? You will be able to assess each one and ultimately make a confident decision.? This process will increase the probability of attaining the franchise profit you seek.
For more information on how a franchise adviser can help you explore business ownership, Contact us. There is no cost or obligation for our service.
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