Most Americans dream of owning their own business. Some start their business from scratch, and others choose to purchase a franchise. There are several benefits in buying into a business that already exists, has excellent “visibility” when it comes to reputation and trust, and that already has all the “kinks” worked out of it.
But as Glenn Sandler, CPA, and founder of G.I. Tax Service points out, there are five important steps to follow before taking the “franchise plunge.”
Establish a financial reserve:
Cash-flow can be daunting for all new businesses – including the franchise business. It may take a year or more – even up to five years – before a business gets into the black. That means paying off the debt; a small business loan, for example, that enabled the founding of the business in the first place.
There are always expected and unexpected expenses in running any business. That’s why it’s essential to have a cash reserve on hand. How much of a cash reserve do you need? SCORE (the Service Corps of Retired Executives), a small business mentorship program supported by the SBA, shares its advice here.
Evaluate current financial commitments:
Since it’s necessary to have a cash reserve before starting your franchise, it’s important to evaluate your financial commitments. Do you have young children who need braces, clothes for school, etc.? Can you supply those needs as well as put money aside for your franchise goal?
If you’ll have to modify your lifestyle for a while – no summer vacations for a few years until your business is well-established – it’s a good idea to share this with your family and get them on board with the financial freedom – and career opportunities for them – that starting a business will bring in the future.
Research franchise opportunities:
Starting any business typically requires a significant investment, and that goes for franchises, too. So, before you purchase a franchise, be sure to research each potential franchisor thoroughly. Talk to the franchisors, talk to the people who are in the same business, and see if you would actually enjoy running a business in that particular industry.
Job satisfaction is important:
Take the tax services industry, for example. It’s a growth industry – as the saying goes, “death and taxes are always with us.” And by helping people with their taxes and providing financial services, you may well enjoy the end-product – helping people receive the income tax refund that they deserve, and through financial services helping to put them into a house, or start a business of their own, or achieve their dreams.
Attend a couple of franchise trade shows and do some research on the International Franchise Association website.
Once you’ve narrowed down the industry in which you’d like to purchase your franchise, start networking with other people in the industry – even other potential franchisees. Network with your fellow business owners by getting involved in your local Chamber of Commerce. The more business people you know, the more you can help each other develop and establish successful businesses.
Being your own boss may be exhilarating, but do you have the skill to deal with employees? Take a few courses in leadership training. The more knowledge you have under your belt, the better.
Take the plunge:
Ideally, by the time you’ve established the amount of your cash reserve as advised by SCORE, you will have accomplished all the other steps as well – complete knowledge of the industry into which you plan to enter, connections with your Chamber of Commerce and business contacts, and enhanced leadership skills.
Everything should be ready so that once your cash reserve hits your goal, you just need to take the plunge!