I had the privilege of working with Terry Josie over the course of several months to help him find a great business fit. It turned out that this former V P of a prominent NASCAR racing venue found a business that he could build and use as a medium to help his clients in a very personal way. He has recently opened a Zounds Hearing Center, a business offering high-tech hearing aids at affordable prices. And he is off to a rousing start. Continue Reading
I get asked all the time…… ”What is the best business to own”. The answer is, of course, it depends. It depends on your skill set, your strengths, your long term game plan for the business, what you want it to do for you and your family and your finances. Our goal at FranNet Carolina is to match folks up with the businesses that best fit them – after going through an assessment and interview process.
“No really Mike…what is the best business to own? In your opinion, of course.” Well ok, that is different. And if I am pinned down to answer this question, my answer is……a business that operates with a simple business model; that can grow significantly; that can produce a recurring revenue stream; and that can produce a good return on the initial investment and on an operating basis.
This opinion was formed years ago after playing a round of golf with a guy I had not met before. We had finished the round and were walking back to our cars and he asked me about my business and I asked him what he did. He said, “oh … I wash windows”. Cute answer. We both chuckled and I thought to myself, man he must wash a lot of windows to be able to afford the nice truck he was driving and play golf frequently. Later on that day, I mentioned his name to my wife and she said, “Oh I see his yard signs for his company all over Charlotte.” It was at that moment I gained significant insight into what makes a good business model.
THINK: Simple – Scalable – Recurring – ROI
Making the decision to get into business for yourself is a big one and should be given much consideration and thought accompanied by much research. For many, the big fear is of course, RISK. What if I invest money and time and start up my business and it fails?
There are ways to reduce your risk: One is to buy a franchise. You are buying a game plan and a system that can give you a real head start and improve greatly your chances of success. Another is to buy a business that is described by the words above… Simple – Scalable – Recurring – ROI. And of course, you can combine the two.
Simple: A business does not have to operate with a complex, innovative business model to be successful and generate good income. In fact, finding a business that performs one service and performs it well is simpler to run, less scary and probably has a better chance of producing an acceptable profit margin. One of my favorite franchises in 2014 operated in the mosquito and biting insect abatement business. Not glamorous; but what a business! They spray suburban homes (and some commercial customers) 7 times per year between the months of April and September. Each spray takes 15 to 20 minutes. As the customer base builds, efficient routes are set up to make sure maximum revenue is generated on an hourly or per customer basis. Few employees are needed and the business operates 7 months per year. Doesn’t get much simpler than that.
Scalable: In my client interviews, I may suggest a business to them and will be told… “oh that market is saturated already.” Rarely is that the case but because you may see a lot of a certain business in your town, you may make that assumption. “Could we really put in another dry cleaner and could we grow it?” Your business needs room to grow and you may be surprised how few customers, out of the entire market, your business needs to become successful. In my mosquito abatement business example, I ask my clients if they think that, over a 3 year period, they could get a 1000 or 1500 households, out of over 250,000 households locally, to use their service. That is less than one half of one percent but still represents a sizable business. In researching the business best suited for you, always consider scalability.
Recurring revenue: It was once said that the 8th wonder of the world is compound interest. The 9th may be recurring revenue. If you could build a business with customers that bought from you weekly or monthly, and do this every year because you gave them great service, you would generate a growing income stream that would build value in your business. Predictable income streams build equity and sell for a higher price than other businesses. In the mosquito abatement business, customer retention rates have exceeded 80% nationally. You only have to replace 20% of your customers annually and you still grow each year with each percentage point gained over the 20%!
Return on investment: Whether you are starting up a franchise or buying an existing business, you certainly don’t want to overpay for getting started. Some franchises have high fees (sometimes justified, sometimes not) and some owners of existing businesses ask for a selling price that is too high. (Selling price is negotiable). You want to feel confident that your business can generate enough income to pay back your initial investment within a reasonable amount of time, say 2 – 5 years, and can generate a good profit on an ongoing, operating basis. Because of their lower start-up costs, low overhead requirements and relatively high gross profit margins, service businesses (like my mosquito abatement example) give you a good chance to accomplish both. No matter how you get into business, calculating (pro forma) projections that are realistic for the first five years of business ownership is essential to determining your ROI potential.
Simple – Scalable – Recurring – ROI
For many people, this may describe a good business concept to become involved in, especially if you have never owned a business before.
Having interviewed over a thousand clients (would-be business owners just starting their research process) during the last 20 years, I try to make sure they know how important it is to think about and have answers to some rather simple and basic questions that often help to define how their personal and professional goals, their strengths and weaknesses and skill set fit with particular business models. These questions, along with our personal franchise assessment, are part of the “business model” building process we use at FranNet Carolina when interviewing a client.
A quick word about our assessment. We give it to all our candidates and then share the results with them. Our assessment has been honed over the years to provide us (and you) information about your motivation for business ownership, your core competencies, your work style and the type of businesses that fit your needs. But as good as our assessment is, it only provides half the information we need to help you make a good business buying decision.
Part of the business model building process also involves asking and answering many detailed questions that help to define the best business model for a candidate. Here, in no particular order, are seven of the most important questions we ask.
I recently had the pleasure of working with Kyle and Tania Price to help them purchase a new Maid Right franchise. Great couple, both possessing a solid corporate background and the skills necessary to grow a business. And, the Maid Right franchise is a growth business – the first maid service business offering the local owner a chance grow the business by bringing in franchise owners under the Maid Right umbrella and allowing them to own and be accountable for growing their own business. Kyle and Tania embody the profile of ideal franchise owners; capable, focused, growth oriented and goal oriented – all attributes needed to build a serious business with upside equity potential. After only a few months, they have already brought in franchise owners and are rapidly expanding their household customers that need quality cleaning services.
Kyle and Tania Price have opened the Charlotte area’s first Maid Right™ master franchise, a new concept in home cleaning performed by owner-operators instead of employees. Maid Right was launched nationally by a group of investors from a major office cleaning franchise system.
Like politics … entrepreneurship is local.
Our job at FranNet Carolina has always been to promote the power of entrepreneurship. And, from the looks of things, we appear to be doing a pretty good job. The growth of our company and the growth of the number of clients we put into business is a testament to that. This year, once again and for the fifth year in a row, we have earned a spot on the INC. 5000 list of top growth companies in the U.S. (Read more…….)
Speaking to over 40 members and guests, Hall updated the counselors on the franchise industry, the pros and cons of franchises and how franchise ownership may work for their clients. SCORE was previously known as the Service Corps Of Retired Executives, but is now recognized as SCORE, “Counselors to America’s Small Business.”
Who doesn’t want to own their own successful business? In our world, we meet a lot of people that do. And, if they are serious about acquiring a business, they are faced with several options. Which option to choose can be a daunting task and finding the proper answer takes research and reflection. Many of our clients are exploring two options, purchasing an existing business or purchasing a franchise. Frankly, there are pros and cons to both scenarios. And, like so many things, part of the answer to the question, “which is the right option for me” is… “It depends.”
My clients Rich and Sandy Sampson recently celebrated their 10th year of being in business. Not only did they celebrate with a party at their store, they also just returned from a great trip to Italy. Congratulations to the Sampson’s !! 10 years is a milestone !!
The Great Frame Up is located in Birkdale Village in the Lake Norman area. The store is opened 7 days a week. Rich and Sandi provide their customers with personal and top notch services and products that include custom framing, readymade frames, wall décor, in-home consultations…and more. Their customers range from local businesses to new home owners and home re-decorators.
The attached article is, I think, a fair look at the franchise industry and provides some insight into the benefits and drawbacks of owning a franchised business. However, as with so many articles, there is usually much more to the story. A few comments in addition to what is written:
Benefits of franchise ownership:
- Limited Risk: Well said by the writer: A franchise provides the tools for you to be successful and provides a real head start.
- Brand awareness: This is important in many franchised businesses; Hotels, food and hair care come to mind. But the truth is that many franchises do not create brand awareness. This doesn’t make them bad franchises. They may just operate in a space where brand awareness is less important. There are many successful owners that own commercial cleaning or sign manufacturing businesses that don’t carry well – known brand names. Most of our clients end up purchasing franchises they never heard of before coming to us.
- Continuing education: This is spot on. Franchises provide ongoing support in the form of efficient operations, new marketing ideas and sharing best practices among all owners.
- Lower marketing expenditures: Well, yes and no. Most franchise owners pay into a marketing fund that goes into national, regional and sometimes local advertising. But usually, the owner will need to do more advertising locally to supplement what the franchisor provides.
More than eight in 10 U.S. small-business owners say they would still become a small-business owner if they had it to do over again, according to a recent Gallup Poll co-sponsored by Wells Fargo.
“This sentiment has changed little over the past 11 years, which suggests that the difficulties many small businesses experienced during the Great Recession did not cause owners to regret their decision to start a business,” the report notes.
One of the key reasons many small-business owners would do it all over again is that they clearly value the independence they get from their choice of career, which no doubt is a part of their satisfaction with their career choice, the report states.