Franchise: Purchase Factor #3

Continued, Top 5 Buying Factors when Purchasing a Franchise

Today, we will cover SUCCESS and FITTING YOUR IMAGE.

Most people get into franchising to be successful. They usually have a dream and are trying to fulfill that dream. Success is in the eyes of the beholder and it means different thing to different people.

In fact, according to the U.S. Department of Commerce, 95 percent of franchises are still in business after five years. Compare that to less than half of traditional start-ups are reportedly still in business five years later. Due to the high satisfaction ratings, it is not surprising that nearly two-thirds (65 percent) of the franchise owners said they would purchase the same franchise again.

As you can see, most feel that they are successful but you have to determine what success means to you. Your next step is determine the franchisees in the franchise that you are researching are achieving the goals that you would set for yourself and living the lifestyle that you would like to lead.

If you find that only the top franchisees are successful in your mind, then take the advice of putting the franchise to the side and start looking at others. Chances are you are not going to be the top franchisee in that system. I certainly hope you are, but it is better to be conservative and play it safe.

Remember, define success and make sure the franchisees are achieving the success that you have defined for yourself.

Jania Bailey, Guest Blogger
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Franchise: Purchase Factor #2

Top 5 Buying Factors when Purchasing a Franchise

Today we will cover AFFORDABILITY.

Having affordability listed as the second most import factor usually surprises people. Unfortunately, some people feel safe about the decision that they are making, but sadly they end up not being able to afford it. This is where your CPA comes in very handy. We usually use the typical rule of thumb that you should have 1/3 in liquid capital of the total amount of the franchise. You should also have some extra reserves just in case.

Here is an example. The average franchise according to the International Franchise Association costs approximately $150,000. Therefore the average person should have about $50,000 in liquid assets that they are willing to invest. Most people can get the financing for the remaining two-thirds from a SBA approved bank or other financing sources. There are many services available to roll over money from 401k’s and IRA’s to help with the expenses.

The number one reason that franchisees and business owners go out of business is lack of funds. Whether it is a Fortune 500 company or a brand new business, if you cannot pay your bills, then you are done. Do not over extend yourself financially. It is unfair to you and your family. If you take the rule of thumb into account above, you should be all right. But please, consult with your CPA or financial advisor so you can make an educated decision.

The other nice thing about purchasing a franchise is that there is no correlation between the cost of the franchise and how much you can make. Franchises range from approximately $20,000 to over $3 million. The ones that have the large price tags, have large price tags because they have a lot of build out expenses, needed working capital, equipment, etc. Just because they have the large upfront fees, does not mean that it is going to be more successful compared to one that does not. Some of the most successful franchises that I know of are in the $75,000 range or less.

Remember, do not overextend yourself financially and you do not have to spend a lot to make a lot.

Jania Bailey, Guest Blogger
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Franchise: Purchase Factor #1

Top 5 Buying Factors when Purchasing a Franchise

Today, we will cover SAFETY.

Safety is the number one buying factor in anything and everything you purchase and is especially true in buying a franchise. Buying a franchise is a very serious decision and sometimes a life changing one. You need to feel safe about the decision that you are making, otherwise you should not and will not do it. How do you answer the question of feeling safe about the decision that you are making you ask? Simple, research, research, research.

Research is the key to safety. You need to use all the help you can find to help you with your decision. Many people use a free service such as FranNet to help them out but you should also consider using a franchise attorney and also an accountant. More importantly, you need to do a lot of the research yourself.

Another important step to safety is talking to those who recently purchased in the franchise (known as franchisees) that you are considering. Since they were recently in your situation and now run a franchise, they will tell you exactly what the process is like. Now, some will be more willing to talk to you than others, but usually they will sit down with you and answer most if not all of your questions. They were once in your shoes and they did their research at one time as well, if they did it right. You also need to talk to the franchisees that are doing very well and some that are not doing so well.

We usually also find it helpful if you also talk to some franchisees that come from a similar background and demographics that you have. If they are succeeding, then you have a good chance as well, but if they are not, then stay away from that particular franchise. While not everything is a given, it will certainly help out in your decision process.

You need to talk to as many franchisees as necessary for you to feel that you have answered all your questions and concerns. Keep in mind, the answer to safety is in the research.

Jania Bailey, Guest Blogger
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Franchise: Five Keys to Buying a Franchise

Finding the Right Franchise for You

A question I hear often is, “If you were in my shoes, what franchise would you buy, or what is the hottest franchise right now?” I repeatedly come back to them with the statement that it does not matter what I think, it matters what you think, since you are the one that will be signing the franchise agreement and ultimately affected by the outcome of the business. Therefore, it only matters what you think. Here are the buying factors that you should think about when buying a franchise:

1. Safety
2. Affordability
3. Success
4. Fitting Your Image
5. Prestige

Those are the 5 buying factors of purchasing a franchise or any business of any kind. The secret is, every one of them must be met and answered in your satisfaction in order for to select the right franchise or business. Let’s discuss each one. I will several posts covering all five.

Jania Bailey, Guest Blogger
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Customer Service: New Ways of Earning Business

Perfect Your Customer Service

This is a new era for business. The future will prove which trends will hold and which will fall by the wayside as no longer relevant. As with all economic transitions, a recession is painful, but these things go in cycles and are necessary. As I’ve mentioned in earlier blogs, having a long-term strategic plan is critical to business growth and sustainability. But even in the wake of the worst economic implosion we’ve seen in modern American history, there will be certain practices and principals that hold as both tried and most importantly true.

Excellent and authentic customer service is one of them. Women are uniquely positioned to emerge as a leading demographic based on our natural tendency to approach business from all angles. Our business strategy begins with the desire to help first and to make a profit second. We are fulfilled knowing we’re positively impacting our environment and people’s lives. That can only be done with a desire to take “good care” of our customers –the type of customer service that leads to loyalty and evangelism.

Planning: Investing in Your Sustainability

Continue Your Education

One of the smartest things any business owner can do is continue their education. The remarkable thing about a recession is it brings to light all of the business practices we believed to be strong and true and reveals how reliable they really are. One thing is for sure – surviving the waiting time for an economy to heal takes sustainability and for a business that means being in a positive cash position to be able to buy time and adjust short term strategies.

Fellow SCORE guest blogger Sue Hartman stated an excellent point which I will copy and paste to save you the time of searching for the actual blog:

“Companies that have a longer term strategic plan (3+ years) have a significant competitive advantage in challenging economic times. They have already gone through the exercise of indentifying/prioritizing key initiatives and know where to apply their limited resources. (i.e., $’s, people). They already have a clear vision for the organization (i.e., what will the company look like in the future)? In most cases, a recession may slow down the rate at which a company moves forward, but more often than not, a depressed economy does not change the direction that a company should pursue.”

This couldn’t be truer and for those of you who aren’t sure if you have a long term strategic plan, then chances are – you don’t. That’s the bad news. The good news is, there are plenty of places you can go to learn how to begin the process – many of them at your local university, business/management school. The Los Angeles Chapter of the National Association of Women Business Owners is fortunate enough to offer a robust program through the organization that teaches women business owners exactly how to develop the long term sustainable strategy, develop with a group of peers similar in size of business and experiencing the same growing pains. And the proof is in the pudding – our graduates have seen an average of 150-250% increase in profitability within a 1-2 years of graduating from our program. These are also the same businesses who, despite the recession, are still alive and kicking. These are the same businesses who will be prepared for the next recession when it comes around in about 15 years.

An important point of clarification regarding having a long term strategic plan: this is not the same as a business plan. A business plan is a written document which details a proposed or existing venture. It explains the intended vision and status, anticipated needs, defined target markets and projected results. A long-term strategic plan focuses on organizational development and transition from an entrepreneurial endeavor to a professionally managed firm built on a foundation of the existing target market, products and services offered to support the market, resources to support the products and services, operational systems to support the organization, management of the organization and definition of the corporation’s culture. Basically, a long term strategic plan is the natural “next step” once the business plan is in effect.

During tough times, business owners re-evaluate every expense. Time is an expense and utilizing any free time you have as a business owner now, while business is slow, to invest in the future to prevent being so severely affected by a recession is one of the smartest things you can do particularly before you get too busy as the economy recovers.

 

Jane Pak, Guest Blogger
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Managing: Why Join a Membership Organization?

Tips for Finding the Right Community

One of the best parts about becoming a business owner is the “freedom”. We take the leap of faith with dreams of flexible work schedules, executive decisions, self-dictated income and freedom from the shackles of reporting for duty at someone else’s beck and call. The only thing we think we’ll miss is the steady paycheck and the group health insurance. But what many will find after a period of time is that the days are typically longer, pay is lower, less steady and freedom has its price. This is normal when you’re a start-up.

What many of us don’t anticipate is how little we appreciated the interaction with peers – the sense of community that comes with being a member of something bigger with other people. Sole-ownership can lead to the sense of living on an island and as humans and specifically women, we are inherently social beings. Business ownership can be counter-intuitive to what makes us feel connected.

So where should you begin to find your tribe? As business owners, we’re chiefs of our own tribes, to find a group to belong to is the exact opposite of business ownership. But as members of a community, it’s critical that we play both leader in our own domains as well as team player in the big community sandbox. As a woman does it make more sense to join a local chamber of commerce or a women’s business organization? What about the multiple women’s networking or peer groups? The options for women are endless and every day there’s a new group of women, matrons, mavens, ladies, broads, you name it – they’re out there.

Growing: Co-opetition

The Strategic (and Smart) Business of Collaboration

There’s nothing like a swift economic crash to force business owners to immediately go into crisis-management mode. All businesses have scaled back spending, increased business development efforts and have continues of boot strapping to ride out the storm. From times like these come the adage, “never waste a crisis,” and nothing could be truer.

A year ago the business environment was overflowing with opportunity. Now most businesses have experienced decreased profits, increased pressure from delayed payments, reduced or eliminated credit, loss of customers and overall contracting. However, in light of such misfortune, a greater opportunity exists. This requires a shift in thought process. Co-opetition is a counter-intuitive method of practicing business. It happens when you, recognize another business with a similar value proposition. It requires reaching out to another business with a historical competitive advantage and working together to gain market share as partners.

Leadership: Stop Worrying and Take the Right Risks

Turn Risk into Opportunity

Close your eyes and picture a risk. Is the picture in your mind’s eye a danger or an opportunity? Few of us realize that risk is not necessarily something bad, and in fact can lead to something wonderful. Another common misconception about risk is that it is all or nothing. Either you can control all of the outcomes of a decision or you can control none of them.

For budding entrepreneurs or early-stage enterprise leaders, this misconception can be paralyzing. Yet the most effective leaders are those that embrace risk and manage it towards the most positive outcome.

In truth, the knowledge and control you have over the factors included in risk are always on a spectrum. Especially in these times of economic upheaval, the degree to which you can know and control all that is knowable and controllable depends on the tools you have available at the time of decision making. And the knowledge you have will never be complete because no one, you included:

• Knows the future except in hindsight.
• Can ever know everything because everything and anything is subject to change without notice.
• Has enough time to identify and evaluate all options and choices.
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Success: Building Bench in Tough Times

Successful Business Growth in Tough Times

The business world can learn a lot from gardeners. Gardeners are masters at nurturing growth. They know when to plant a seed to ensure the external environment is ripe for new opportunity. They know how to care for the emerging organism so it begins to grow and withstand challenging conditions. They know when to prune, often cutting out the strongest branches to enable sunlight in to foster more growth that better fits the environment. And they know that they must step back at times, assess their progress, and identify things that inhibit the organism from reaching its full growth potential.

CEOs also need to periodically take stock of their employees to ensure that growth is possible. Times of turbulence offer companies the opportunity to look at their talent pool and identify what the company needs to achieve its future goals. If your future goal is to become the leading supplier of the latest technology widgit, for example, ask yourself if your current employees have the right technical skills to achieve new innovations in widgitry? Does your management team have the strategic vision to both identify and pursue new widget markets as well as to help expand the current ones?

If the answer is yes, then the question you now need to ask is what can I do to help my employees continue to be their best? The reason that continued investment in your people is so critical is that the talent wars continue to survive and thrive. If you don’t invest in keeping your human assets and building upon their strengths, you can be sure your competitors will invest in recruiting them.

If your answer is no–you don’t have the right employees to help you grow into the future. Now is the time for you to make adjustments to your bench.

Even the strongest performers can’t help you achieve your company’s goals if their strengths are not in the areas your future organization needs. Often, this is a very difficult decision for leaders. Most emerging organizations tend to hire for the skills needed at this very moment. And many founders develop strong loyalties to those who were there “from the beginning.” When the organization moves forward or in a different direction, leaders may fail to make the needed talent changes. This can be detrimental to your organization. And it may be a disservice to those valued employees whose skills were right at one point in time, but who may not reach their full potential because they’re no longer a fit at your company.

If your strong performers can help drive the company into the future, be sure to invest in them. If they cannot, or their expertise lies in an area your future organization doesn’t need, take a cue from the gardeners. Prune systematically and fully with a vision of the future. Help your root-bound talent replant in an environment that will nurture their growth. And provide the necessary nutrients to foster the growth in your own organization to achieve its full growth potential.

Elaine Eisenman, Guest Blogger 
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