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There are dozens of benefits to opening a franchise, including a support system from like-minded entrepreneurs on the franchisee, franchisor and vendor levels as well as the opportunity to invest in a tried and true business model.
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By Roger Murphy
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As large in number as they are common, layoffs are a threat to professionals in corporate America. The nation has experienced more than 460,000 layoffs between January and October 2016, leaving hundreds of thousands of professionals to seek new opportunities or alter their career paths entirely. Well-seasoned professionals are finding themselves in limbo, some too young to retire and others too experienced to be compensated appropriately in their field, causing many to transition into business ownership.
Proprietorship is an attractive option for people who have honed a variety of skills over the course of their employment, absorbed valuable experiences and are now seeking independence, increased financial success, control and freedom. If you are one of the many professionals impacted by layoffs and are interested in taking the entrepreneurial leap yourself, working with your spouse or setting up a family or legacy business, consider the following information to help assess if the decision is right for you.
Ask the Right Questions
When deciding if business ownership is a viable career option for you, ask yourself if you’d rather open a new business or purchase an existing business. Identify what you are trying to accomplish. Create a vision of your goals, needs and objectives including income, investment and work-life balance expectations. What are your non-negotiables? What are your strengths, weaknesses and transferable skills? What kind of communication style do you have? How will you access the success of your employees and yourself? What can you bring to this business to set it apart from your local, national and market competition? If you answer these questions effectively and still still be enthusiastic about your new venture, proceed — and become passionate about attaining your vision.
Is Franchising a Good Fit?
In evaluating your options for business ownership, you might consider a franchise. There are dozens of benefits to opening a franchise, which include a support system from like-minded entrepreneurs on the franchisee, franchisor and vendor levels as well as the opportunity to invest in a tried and true business model that is established and proven to succeed.
Far too often, franchising is not given the credit it deserves. Credible franchise systems present a variety of benefits such as providing a network of support from fellow franchisees and franchisors, or offering best practices, training and perhaps even a database of prospective clients upon entrance to the franchise network. It’s because of these attributes and many more that owning a franchise presents a much lower risk to business operators when compared to an independent business. With a franchise, you know what to expect in terms of costs and marketing, and your consumers know what to expect as well because of the established brand awareness. This is why individuals, investment teams and others have opened and currently operate hundreds of thousands of franchise businesses.
If you’re having a tough time deciding which franchise is right for you, or if the identification process seems to be daunting, look into becoming a franchise coach. Franchise coaches are in a unique position to see a broad overview of various franchise models. Using assessments, they can help you organize your thoughts and ideas in a safe, patient environment with multiple inputs. Their goal is to help interested prospects learn and understand the franchise models in order to take full advantage of their benefits and, ultimately, find the right fit in franchising.
Buy an Existing Business
Additionally, if business ownership is on your radar, you might be thinking about purchasing an existing business. There are certainly benefits to doing this over starting one from scratch — not the least of which is the daunting knowledge that more than 50 percent of independent startups fall flat within five years. Existing businesses already have an established track record of cash flow, as well as marketing plans and procedures that are in place. Oftentimes, these businesses have an established clientele and loyal employees as well. They may have already created a dedicated following within their community, and those individuals will be eager to see the business grow and improve under your leadership.
Benefits of Brokers
Given that 2015 was a remarkable year for business sales, business brokerage services have increased in demand. Whether you are buying an existing business or investing in a franchise opportunity, brokers can provide knowledgeable insight on price values for the current market. A broker can also help demystify the business valuation process, as there are dozens of factors to consider such as the nature of the business and its history, selling price of similar businesses, lease, location, economic conditions, competition and much more.
In short, brokers can weed out the opportunities that aren’t worth investing in. They can arrange buyer-seller meetings with trustworthy candidates and can set up appointments so you can get a sense of what a day in the life of the business might be. All of these steps are important to making sure you’re doing your due diligence. Your broker helps you find the information you are entitled to receive.
Find the Funds
Whether you’re planning on opening a new business or purchasing an existing model, there are several financing options available. The first and most obvious choices are personal savings, utilization of a 401(k) or an IRA rollover. However, not everyone has all of the capital available to purchase a business. In those situations, the U.S. Small Business Administration may guarantee small-business loans up to $5 million with a term of up to 25 years. These SBA loans can be used for starting a business, working capital, purchasing property, equipment, fixtures,inventory, leasehold improvements and refinancing debt. Your broker will educate you on options and discuss what is best.
Additionally, many sellers and franchisors offer financing options through different organizations and partnerships. Finally, you might choose to partner with another buyer to share the risk. If you’re not sure which of these options is best for you, a business broker can provide valuable advice.
Roger Murphy, Founder, President and CEO of Clearwater, Fla.-based Murphy Business & Financial Corp., passed away on Nov. 30. He is considered a pioneer in the business brokerage and franchise worlds.