What to Know Before Investing in a Franchise Business
As a franchise consultant, I provide useful information to individuals who want to invest in a franchise business. Part of that is sharing my experiences. I have learned many lessons through the years that can provide some insights into franchise business ownership. These lessons come from my time as a franchise consultant and also as a business owner.
Franchise Seekers Should Know Themselves
Knowing yourself is essential in a franchise business investment. Knowing what motivates you, what your risk tolerance is, having and managing your expectations are the keys to success. A thorough personal financial analysis is critical. Do you have the funds to invest and/or qualify for financing, have the working capital necessary, and are you able to pay for personal expenses until the business generates a sufficient income?
There is no Perfect Business
With all the different businesses I’ve personally been involved in or investigated as a franchise consultant, I have found that there is no perfect business. Let me explain. When someone decides to invest in a franchise business they should understand that there are also going to be aspects that they do not enjoy and/or are not good at. I have seen people looking at franchise businesses with the idea of finding the perfect business. This attitude isn’t realistic. There are challenges of being in business. There are going to be things that are undesirable. When challenges arise and/or unpleasant tasks need to be done, there is a tendency to get discouraged.
When looking for perfection, many people see flaws everywhere and give up. Perhaps a quick illustration will help. When I was in private practice doing addiction counseling, my office was in a small house. The house was all counseling offices. We had no janitorial services so there were times when I had to clean the house, including the bathrooms so the facility would be clean for clients. I liked the clinical work but I did not like cleaning bathrooms, but it had to be done. The point is that in every business you may have to clean some bathrooms from time to time!
Have a Passion for Business Ownership, but not Necessarily the Business Itself
I have heard it said that if a person can find a business they are passionate about they will never have to work a day in their lives. First, let me say that I have seen people who have been fortunate enough to be passionate about their business and succeed, so it’s not impossible. I don’t want to be a downer, but being realistic there is also a caveat. I know of people who have gone into a business because of a passion. They end up spending so much time on it, that it becomes boring. Sometimes, the passion gets lost. I know a gentleman who loved golfing and bought a pro shop. His hobby turned to drudgery. Now he is immersed in fitting clubs, ordering equipment and clothes, dealing with employees, paying bills, etc. When looking at becoming a small business owner, perhaps developing a passion for business ownership is the key. Business ownership allows you to have more control over your fate; provide jobs for people to support their families; have a product or service that people want or need; be an integral part of your business community and support other businesses through the use of their products or service.
Business Owners Need to Move from Paycheck/Expense Mentality to Profit/Investment Mentality
When I first decided to become a small business owner, I did what many people do when entering uncharted waters. I read several books. Two books I read were authored by a husband and wife who were business partners. I wish I could remember their names and the titles of the books so I could give them direct credit, but this was a while back. I took several bits of wisdom from the books, but one has really stuck with me. They said that a business owner needs to move from a paycheck/expense mentality to a profit/investment mentality. This is definitely a paradigm shift that is not easy but important. With the paycheck/expense mentality, one tends to look at things as limited, and that spending money is an expense. With a business owner mentality, one looks at certain expenses as investments that can increase profits and get a return on investment. I have seen how important this is with franchise candidates who have become business owners.
Commit to What you’re Buying Before you Invest in a Franchise
A huge lesson I have learned as a franchise consultant has resulted from keeping in touch with the candidates I have placed into franchises. Franchising is all about the systems and processes. If you are going to invest in a franchise then please, please, please use what you are investing in, the systems and processes. If you are not going to do that for whatever reason, then do not invest in the franchise. Use that money to start your own business. It makes no sense whatsoever to invest in a franchise if you think you can do it better and proceed in that direction. I have seen people do this. In virtually every case they have failed and have learned a very expensive lesson.
Learn from Other’s Wisdom
I looked up the word wisdom. In the online Cambridge Dictionary, the definition is: “the ability to use your knowledge and experience to make good decisions and judgments.” Wisdom, I believe, can also come from using another’s experiences to make good decisions. My hope in this article is to impart some wisdom based on the lessons I’ve learned in life and as a franchise consultant. Be wise!!