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Why Explore Franchising Rather than Buying an Existing Business?

The basic idea is that people look at existing businesses because they think they are going to walk right into existing income and life will be rosy!  BUT….

Good luck finding that business — I’ve talked to a number of people as they searched and asked them “How long have you been searching?”  And the answer is typically:  “Oh, 2 years…..”  or more! 

 

When you do find that one “great business”… that’s in the right place… in the right industry… that has good books and records… and the Seller has a good reason for selling (meaning they’re not just trying to get out of Dodge before the whole thing goes under)… Then what surprises lie in wait?  Are those “good books” really reflective of the performance you will be able to achieve?  Will employees really stay?  And are they as good as the Seller said they were (you usually don’t get to meet them prior to the sale).  

 

How long is it going to take you to learn the business?  If you think you can walk in and take over and have things run smoothly from the get-go, I’d urge you to think again… In any change of ownership, there will be growing pains. 

 

And… when you do have issues after the sale goes through… who do you call?  Sure the Seller will be around for a little while, but what about a year from now or two years from now?  There isn’t anyone for you to call for assistance or help with marketing or strategy or growth or questions when something unusual comes up!

 

But what if you started a franchise instead? You could have potentially saved 2 years of hunting; you would have paid a far lower investment since you aren’t paying for a multiple of earnings that someone else grew.  You would have learned the business from the inside out with the hand-in-hand support of a franchisor along the way.  The employees would be loyal to you, you would understand the accounting because it would be done at your direction; there wouldn’t be the surprises that no one told you about…and after 2 years, you would have a good solid business that was rockin’ & rollin’.

 

The same applies to your choice of starting a business now or taking another job and waiting 2 years…Sure you get 2 years of salary if you take that job…but in 2 years, you are just that much further down the road without an asset to sell and looking at perhaps yet another layoff.  And by the way…everyone focuses on how much they invest in a franchise but they forget to look at how much you get to sell it for when you want to exit….and how much do you get to sell your job for when you retire?

 

Franchising may not be right for everyone… but for a lot of people coming out of the corporate world, it definitely provides the greatest possibility of success, the smallest amount of risk, and a better possible future with the ability to keep an income stream all the way into (and through, if you want!) the traditional retirement years.  Not to mention your ability to sell for a multiple of earnings and get paid back many times over on your investment. Banks are frequently far more willing to finance an existing franchise than an independent business because they know the franchisor will be there to support the next owner.  So you get to cash out rather than being a bank for your buyer.

 

Passion: Friend or Foe?

 

We all want to be passionate about what we do for a living, right?  After all, with the amount of time we spend working, we’re a lot better off if we feel passionate about our work, right?  And if we’re thinking of actually starting our own business, well, heck, we better really feel passionate about the business… right?!

 

Well… maybe.

 

If being passionate about the business is being passionate about the product, we’ve got a problem.  A client of mine, Chris, told me that he wanted to be passionate about the business he got into.  And although he had never held a sales position in his life (he was, in fact, a Chiropractor who had tired of the hassles of medical insurance companies and the increasing cost of malpractice insurance), he insisted that he could sell any product or service that he was passionate about.  But he discovered a problem.  Although he was passionate about health and wellness, he was not at all excited about getting up in the morning and going out and “selling” his new franchise’s gym memberships – and very quickly got out of the business.

 

The school teacher who looks into Kumon, the IT professional who looks into “Geeks on Call”, and the hairstylist who looks into Great Clips are all making the same mistake.  They are mistaking the business itself with the role they will have in that business.

 

So what happened to that old saying “focus on what you’re passionate about and do what you enjoy and success will follow.”  Well, there’s the catch.  The product or service itself has very little to do with what the owner’s role in that business will be.

A Passion…for What?

With all that said…passion IS important.  But be careful what we are talking about being passionate about!  I want you to be passionate about what you do!!  I’m passionate about what I do… and I think that if you are going to invest money in a business that you are going to work in, it’s great if you can be as excited and passionate about it as I am about mine!  But the difference is…you want to be passionate about what you get to go DO…not about the product or service.  And you want to be passionate about what the business will do FOR you.

 

I can promise you if the business doesn’t make money, it won’t be long before you will no longer passionate about it – so making money is important!

 

I can also promise you that if you’re working more hours than you want to be working (after some time learning the business) that you aren’t going to be happy either – lifestyle IS important. So look at whether the hours required are going to fit!

 

There are a whole host of other elements that are probably important to you as well such as the kind (white or blue-collar?) and number of employees you have; whether you have business or individual customers, etc.  This is where “building your Entrepreneurial Profile” becomes so important – so that you really know what you are looking for before you start picking franchises wildly off the internet, and you can assess them by pre-determined criteria.

 

Passion is more about what you are being (a business owner) than it is about what you are doing (selling gym memberships).