Owning versus renting, it is a big differentiator in our society. Owning demands respect, renting is not something that most people brag about. And that goes for just about anything.
From the time I was a kid it was put in front of me with a sense of pride that my parents owned the homes we lived in. Now I grew up in a middle class family, not rich or poor but we had to manage our money so my Father would fix the things that needed fixing and we took care of our home knowing if we did that the value of the home would go up over time and we could capture that value when we sold it.
So, the idea behind owning is to make an investment in your future.
I asked my Father in my teen years when we were doing a home repair that was keeping me from seeing friends “Why own instead of rent, renters get a handyman when things break?”
My Father said “Renters get a handyman but they already paid for him in the rent, they pay for everything in the rent as well as ongoing profits for the owner and in the end they own nothing, they can’t sell their rental. We do our own repairs when we can because we do better when we pay ourselves!”
Now, I point that out because we have also all been trained to do good in school, get a good job and work hard for our employer so our future will be taken care of.
The world has changed since that timeline was a reality.
Today you do well in school and amass student loan debt in college to get a job that you can be downsized from any minute. Downsizing is an everyday occurrence, I remember when any corporate downsizing was front page news but now you rarely see them as a big deal.
Do you own or rent your income?
Let’s look at homes as a comparison:
Home owners put a little money on the table, get a loan for hundreds of thousands or even millions of dollars, they take care of that home and the home serves a proven need. Homeowners sometimes have to follow HOA guidelines that are created to help a community maintain its resale value. When it is time to move on they sell the home and capture any increase in value.
Home renters make no substantive investment to move in, they do not take out a loan or have to do any upkeep. The owner of the rental property does all the maintenance and upkeep to maintain the value of their property. The renter must follow a set of rules provided by the owner and the owner can ask the renter to leave any time. When the renter leaves for their next home they may get their security deposit back, but they do not capture any increases in value of the property that happened while they lived there.
Now, if we switch the topic to income and use the comparisons above, do you own or rent your income stream?
If you have a job you make modest investments after completing school in printing resumes, getting a good “interview suit” and maybe traveling to interview. This is without considering the cost of personal expenses during mid-career pay gaps due to downsizing. Personally, I would count those too.
Clearly getting into a job has many of the same cost considerations as getting into a rental property.
As you work your job you have to live by the rules set by the owner of your company/job, whether or not they are for your benefit (they are really there to benefit the employer). When you leave your job, in most cases, you pack up all the personal mementos in your cubicle or office and leave. You do not capture the value that you created for that company.
We can see that leaving a job is much like leaving a rental property; you get no real financial benefit from having helped increase the value of that company other than maybe being able to demand more pay from the next company that you will go increase the value of.
In comparison let’s look at owning a business, a franchise. Franchise owners put down some money and many get a loan for the remainder, just like a home owner would. They work to build their company, just like an employee would. They take a paycheck as the company grows, just like an employee would. And when it is time to move on they sell the business and capture any value they built, just like a homeowner would.
So the comparison is a bit of a blend of both worlds in that they both own and get paid without any income caps while they own it. But the big difference is at the end, when franchise owners can capture any value they built, whereas employees pass on that asset value to the owners of their company.
While the homes our franchise candidates own generally run $200k to $1.5 Million, the franchises our average candidates look at only cost $50K to $400K. It is interesting that their largest investment does not pay them while they own it, in a perfect world we would invest more in creating income streams than in the roof over our heads. But while our candidates are often looking at their first move to control their income this lower investment is often just the first step towards building a portfolio.
Our goal for each of our candidates is that with time they will have a diversified portfolio of income streams that will offer them predictable income through any economic ups and downs. Additionally, we want to see them set up to have this ongoing income stream well into their retirement years for added long term benefit.
Becoming a franchise owner is an investment in your future.
What is your success story? Let’s go find it!
George Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution. Contact the Franchising USA Expert George’s Hotline 703-424-2980.