Thinking about building your business portfolio with multiple franchises? It’s a top question for lots of business owners – here’s how to do it with confidence.
Every business plan has a certain set of current targets and long-term objectives. Those targets and objectives are ultimately meant to put a business on the path to its most fundamental goal: growth and success.
While every business owner — big or small — sets out to accomplish specific goals, bigger is not always better if done without proper preparation.
For franchisees, running one successful franchise location may provide the confidence to begin expanding their business footprint. However, that expansion must come after thoughtful planning and a strategic blueprint or vision.
Building a diversified multi-unit business is an appealing and often rewarding pathway to franchising success when done correctly. And there are some easy steps to ensure successful and sustainable growth through diversification.
Find Your Fit
The key to building a multi-unit portfolio of franchises is to determine what works for you.
This not only means studying yourself but doing research on any possible franchise opportunities as well. Do their business models align with, or complement, your preferred style or business portfolio? Will it allow you to work in an industry that motivates you or provides a service that is of value? And perhaps most importantly, is the franchise’s model one you’re familiar with and confident can succeed?
If you are more comfortable running a business model predicated on simplicity (with little space and small overhead, for example), then find a franchise model that fits that category.
The easiest way to take a step towards growth is to replicate a model you know can work, that motivates you to make it happen and provides clear opportunity.
How Much Expansion?
Another factor of deciding when, where, and how to grow is to determine what expansion looks like in your eyes.
Are you comfortable with the franchise you currently run and simply want to add another location to your portfolio? If so, you might need to determine how your costs or customer base may differ in a new location or what additional operational resources are needed.
The familiarity with the brand could be offset by any uncertainties about moving into new locations. Additional resources may lead you to determine that the best course of growth would be adding a new franchise brand entirely.
Business owners know their cities better than most. They might notice an opportunity for certain brands that could succeed just down the street from the franchise they already run. Additionally, there would be an existing knowledge about how local taxes, operating expenses, or regulations would affect that business opportunity.
Whether adding within the same franchise model or branching out to another brand, it’s essential to have a full picture of what that growth and opportunity could mean in relation to the business that is already thriving.
Diversification Can Be Key
That relationship with the business you’re currently running is why diversification is often an important option to consider.
As 2020 has taught so many business owners, it is nearly impossible to enter any opportunity with the guarantee of zero risk, regardless of the industry. When choosing your path to expansion, diversification is often the best route to combat change or uncertainty.
Much like investing in the stock market, owning businesses in multiple sectors can spread out your risk if one has unforeseen challenges. In the event that one of your franchise concepts falls victim to a rough quarter, for example, your portfolio could be protected by the success of a concept in a different industry.
But diversification is not all about managing risk. It could also open up avenues for your franchises brands to share crossover business with some creative marketing strategies and thus compounding your opportunity for success.
As with any business venture, it is imperative to think with your head and not your heart. While expanding may seem like a dream opportunity, you’ve got to ensure it has been thought through clearly, the numbers crunched, resources considered, and opportunity aligned.
You shouldn’t target growth only for the sake of growth. You shouldn’t jump into a new franchise simply because you like the brand or what it sells.
Your financials must be in order, and you should have a clear understanding of the business plan for your franchising prospects. As mentioned above, make sure the model fits what works best for you and whether it’s a positive, synergistic addition to your diversified business portfolio.
Building Teams Is Just as Important
Of course, growth is not possible without some help and resources along the way.
By definition, building a diversified multi-unit business will mean you’ll have multiple entities to oversee — and you can’t be everywhere at once. Making the move to expand should happen once you have the team in place, or accessible, to execute your plans.
Take your time to make sure you’re ready for growth. Decide with your head and not your heart. If a prospective venture fits the growth model you prefer, makes good financial sense, and diversifies your business portfolio, you are well on your way. You can find out more about Payroll Vault and it services at www.payrollvault.com
Sean Manning, CPA, CFE is partner and CEO of Payroll Vault brands: divisions include Payroll Vault Franchising LLC, the payroll service franchise business system, and Payroll Vault – Littleton, the corporate location and independent payroll service company. He is the former owner of Insperience Business Services, an accounting, tax, and business advisory firm located in Littleton, Colorado, which he sold in August of 2018, subsequent to 3 firm acquisitions from 1998 through 2004.