There are many times in your life where you’ve likely been at a crossroads and wondering what you should do. Should you ask your girlfriend/boyfriend to marry you? Should you start a family? Should you quit your job? Should you take the promotion? Should you move your family across the country? You may feel an emphatic yes or an emphatic no on some of these life decisions you’ve made. But sometimes the answer isn’t so clear. Sometimes the answer could be yes or no and it’s really hard to come to that final decision. Either choice could result in something positive in your life, so how do you make that choice?
Every big life decision we make has consequences. I know that word has a negative connotation, but even a positive or happy decision can cause some unwanted outcomes. Unfortunately I don’t have a magic answer for your decision making and I’m not going to be able to answer the title of this blog post for you. But what I do have are three areas that you can analyze while you are making an important decision. You can use this strategy when making other decisions as well, but today we’re going to focus on this as it relates to buying a franchise.
We are going to look at how your finances, relationships, and emotional state has to do with buying a franchise and how that can help you determine if you’re making a good decision or if maybe it would be better to wait another year or two. When we look at these three areas, I want you to think of them as a spectrum. What are your resources and what are you willing to risk? Where would you put yourself on this spectrum of readiness for each area and why?
Financials
This one is definitely the easiest to figure out. Either you have money to invest in a franchise or you don’t. While this could look different for every person since there are multiple ways of funding a franchise, you’ll be able to figure out the answer to this question pretty quickly. Every franchise has a Franchise Disclosure Document and in that document there is an item 7. The item 7 discloses the start up costs of that franchise. This can range anywhere from $50K all the way up to multi million dollars. So the first part of the financial question is “do I have a way to fund this purchase?”. After consulting with a funding partner or looking at your finances, you’ll be able to say yes or no.
There is another variable to finances that isn’t as cut and dry and it’s how much are you willing to lose? If we look at worst case scenarios, what would you be willing to risk? Thankfully, you will be able to see what other worst case scenarios look like for other franchisees of the system that you are looking into. You will be able to find out what the worst performers are doing so you can have an idea of what your worst case scenario could be. Then ask yourself if you’re willing to risk that. Side note: I would keep in mind that if you are thinking that you could be a poor performer of the franchise, you really shouldn’t be investing in that franchise, or maybe any franchise at all. It’s important to know what that could look like, but you should never aim to be a poor performer. After looking at your financial situation, most people can figure out what their risk tolerance is. If you don’t have a way to fund the franchise or you aren’t willing to risk a potential loss, then you’ll need to wait until those answers are yes in order to move forward. Even if everything else is a yes, there’s no point in continuing if you aren’t in a financial position to buy a franchise.
Last note on the financials – did you know you can find data to back up the failure or success rate of a current franchise? We can look at retention rates (what percentage of owners are continuing), we can also find SBA loan default rates (what percentage of owners of that system aren’t able to pay their monthly loan payments), and we can see the financial performance that is disclosed of any franchise. Yes, investing in a franchise could be a risk, but looking at all of this data will really help you to come to an informed decision.
Relational
Most people don’t make major life decisions alone. They typically will consult with their very close family and friends. Your decision to start a franchise could have a big impact on your family – in either a positive or negative way. Is your spouse or partner on board? What do they think about it? What will it mean for your daily family life? Some spouses are fully on board and very supportive while others essentially sabotage the entire process. You need to know how your family really feels about you starting a franchise. This should be something that is talked about a substantial amount. Do you know how much time will be necessary to start your franchise? Does it mean you could miss out on some family events the first couple years? Is it a business you’ll be able to pass down to your kids some day? Do you have adult children who would want to start the business with you? Will this franchise provide you more of a family/life balance and you’ll get to spend more time at home and away from work? Find out what this franchise looks like for other owners and see if it will fit with your family lifestyle and goals for your family. Check in with your partner and make sure they are on board. If they are supportive and you are content with how your family could be impacted then you can assume this area is where it needs to be.
What will your friends and extended family think about you going into business and what will they think about the franchise you ultimately choose? For some, choosing a franchise that is not flashy or they wouldn’t be proud of telling their friends about is enough to make them say no. For others, they are more focused on the return on investment and not as much what the actual franchise sells or provides. I would look at how important it is to you what your friends and family think. Will your friends be supportive and help you promote your business? Do you have friends or mentors who will be encouraging you no matter what decision you make?
Emotional
In my opinion, this is the area that can make or break it. Having the right mindset is one of the key indicators of success amongst franchisees. Are you in the right emotional place where you can take on this challenge? If you’ve just had a major life event happen you likely aren’t in the right emotional state to buy a business. Starting a franchise is hard work! You can’t go into it half-way and expect to be a top performer. Don’t get me wrong, once your franchise is established you will most likely be able to take a step back and manage in a more semi-passive role. But that’s not typically how you start. The first year of any new business could be fun, challenging, exciting, draining, empowering, overwhelming, encouraging and many more emotions. You need to be in a state where you’re ready for the ups and downs of the business because there will be both. If you aren’t there yet, then maybe wait a year until you feel you’re at a more stable place. If you’ve been feeling bored and underutilized in your current position this might be just the challenge you need.
If after reading this post you’re energized, excited and feel comfortable with the realities of being a new franchisee, then it means you’re ready. Your dot on the readiness line is likely more toward the right side of all three categories. On the flip side, if this post has you feeling more anxious and doubtful, it likely means your dot on the line may be more toward the left side. You aren’t quite to the point that you’re ready to risk some of those things: finances, family, social and emotional. Take time to work on the areas that need improvement. Or maybe you just received the clarity you needed that business ownership will not be for you. Regardless, we hope you will use this strategy when you are making other big decisions in your life to gauge your readiness. If you’re ready to speak with us and start looking at what franchises may be a good fit for you personally, schedule a call with us HERE.
