Being our own boss is one of the biggest dreams and endeavors one can devote to today. There are plenty of ways to make that happen. This holds true especially today, with the advent of the Internet. The information is out there like it has never been before, right at our fingertips. One of the ways to make this dream come true is buying into a franchise. Switching from corporate to entrepreneurship is a common occurrence, but there are multiple factors to consider before making a decision. Corporate will help us gain relevant experience and knowledge that will enable us to manage a future business successfully. It is critical to consider how such a decision would impact our financial, professional, and family life. Can all of these and many more aspects survive such a bold endeavor? To answer this question, we will go over some of the most important points to consider when trying to acquire a franchise.
1. Understanding the market
Two choices can be made here. We can either go for something trendy, temporary or limited in some other way or go for a carefully thought-out idea. Not going for something relevant to our area that is actually needed by the general public will be a costly mistake. Are we going to have a strong and regular customer base with the franchise we have in mind? Is there a need for such a business that we can fulfill? Would such a business do well, or in other words, is it cost-effective? Are there market changes that we can anticipate that would change any of these factors in the recent future? If we make our company out of a passion project or a hobby we had, it is not enough by itself to stay afloat. This is one of the most common mistakes that investors make. So, make your due diligence and research the market to the best of your abilities. Also, be introspective and ask yourself do you have the time and the nerves to follow through with it?
2. Counting our cost
If possible, we need to confirm upfront the total investment we would have to make. This includes the setup and operating expenses for the franchise. If we fail to do that before signing an agreement, we may find ourselves running out of finances even before the business has taken off. Once we have established the required amount for rent, inventory, royalty, and marketing fees, only then should we choose our sources of finance.
3. Make a wholesome plan
Drawing up a long-term plan before signing on the dotted line is paramount. That is highly dependent on what we intend to do with it. Do we plan to sell it, maybe run it for some time and then get out, or do we mean to leave it to our children? The better grasp we have of the endgame, the better we will know what choices to make in the future. A rudderless ship has no destination.
People often go into acquiring a franchise while not communicating and networking with relevant people. And no, unless they also own such a business, our family and friends do not count. The most important people for us to talk to is another person that owns a franchise like the one we are trying to run. No one knows the business better than other owners and they will provide us with invaluable insight into the intricacies of running one. Ownership, market research, customer behaviors, and many more are all the knowledge we could gain from these people. The sooner we start talking with such folk the better, as business ownership is an ever-evolving commitment. It pays to stay ahead of the curb.
5. The debt and loan question
Over encumbering a business with too much of debt is also another common mistake to make. Usually, it is enabled by overly optimistic projections. Do not make a mistake, it is normal to take out a loan to finance a business. But it is something not to be taken lightly or done on a whim. When a bank lends us money, the risk is solely ours. It should be done in a careful and calculated manner. Will our business be able to handle the payments towards paying off that debt? Depending on the field in question, some franchises require the whole 100% debt financing and some require only 20%. Take the minimum amount you actually need.
6. Taking it slow
It could be tempting to go for the big fish right away but do not bite off more than you can chew. Having insufficient financing to fund the initial purchase or to continually run a franchise is a possibility. Try not to fall into such a mistake, as it is the number one reason for business failure, as research suggests. If things go wrong the franchisor gets all the blame even if the model is performing as intended. That is a sure indicator that the franchisee has bitten off a little more than they could chew. Before thinking about running multiple units, make sure that the first one is a success. We can always open multiple units of different brands, especially if it is the same franchisor in question. Worth noting, if there are multiple franchisors involved, we will get resistance. We need to prove ourselves in one brand first, before taking on another challenge. Walking before running is the key while being assertive and aggressive just enough to take our share of the market. If we need help to get started, there are plenty of companies like the popular tea franchise that will provide us with all the necessary information.
Buying a franchise is not for everyone. As we can see, there are plenty of factors to consider, some of which we have no control over. But one thing is certain, we can account for all of them. With enough investment of time, effort, research, knowledge, and of course finances, we also can be our own boss.