How Much Money Do You Need For Your New Business?

Putting aside sufficient capital is the most basic piece of information for any new business. How to figure out that magic number can be the tricky part. From my experience as a small business owner and a franchisee, the only way to get a good read on how much is enough is to buy a franchise. With an independent business, even the best business models will likely only arrive at a best estimate of required capital. With an established franchise, you can learn exactly how much money you need because the business systems are already firmly established and lots of folks operating under the same model are updating the system on a regular basis. You can find out from these other owners how much capital they needed when they started. When you have enough money to start, you’re less likely to find yourself short on cash and forced to shut down, one of the greatest causes of small business failures today. Not only do you know how much money you need to operate, you can get a clear handle on how much you need to get started. Most of my clients typically invest between $80,000 to $150,000, which includes a franchise fee, cost to fly to the training, computer systems, plus the working capital required to get the business to profitability. The number doesn’t include your living expenses, but, presumably, you know what you need to live on until you can start earning profits. The types of businesses available in this start-up category include B2B, such as temporary staffing and business coaching; personal or residential services, such as senior care or house painting; and academic tutoring. Profits may start rolling in as quickly as two to three months, but it could also take six, nine or even 12 months to get to profitability. So preparation is critical. Most expect to earn in the six figures with these types of businesses. This is highly achievable, but not everyone gets there for a variety of reasons. While many people I work with finance their new businesses entirely with retirement savings, you only need about one-third upfront and can borrow the rest. I suggest consulting a good franchise coach to help teach you how to conduct an excellent due diligence to help you choose a business that best matches your business and professional goals. You should also consult well-respected legal and accounting experts to maximize your chance of success.

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.  

Starting a new business? How to know exactly what you’re getting into – 5 easy steps to help you succeed

You’ve decided to make a break from corporate America, flex your creative muscles for your own bottom line for a change, only you’re concerned about the risk of starting your own business. Sound familiar?

No worries. There’s a great way to strike out on your own and get a new career while minimizing your risk…a way to learn everything you need to know to succeed, and learn it from people who have walked the very same path. That is to pair up with a well-run franchise operation.

The trick is making the right choice to suit your own unique set of interests and skills. The good news is all the information is readily available to help you select just the right business for you.

And once you do, a franchise operation offers a great network of support, plus a treasure trove of statistics and operating history that will give you a leg up in the marketplace.

By contrast, when you start an independent business, you must invent your concept and innovate your own marketing, inventory and accounting controls and countless other procedures from scratch, some ahead of time, and, inevitably, some on the fly as you go along, which will likely significantly impact your bottom line as you get started and optimize your systems.

With a franchise, many of those risky variables disappear since the franchise company has already figured out a system that works.

To help you make the best selection, we suggest consulting a franchise coach, who can help steer you toward reputable franchise companies. Of course, like everything else associated with your own business, the responsibility lies with you to do your due diligence before signing your name to any dotted lines.

We suggest you start with these five steps to narrow down your franchise search and maximize your success with your new business:

Conduct a personal inventory

Write a list of your professional and personal skills. Then write a wish list of the types of businesses you would like to operate and the types of skills necessary to run these businesses. See where they intersect.

Research possible franchises

Check the website of the International Franchise Association for a comprehensive listing of franchises that suit your personal profile. Then go a little deeper by Googling them.

Zero in on a few franchises

Request a copy of the Franchise Disclosure Document, required by federal law, for your top two or three franchises and read through these. Look for details about the franchisor’s background, initial and ongoing costs, litigation history, plus information about the types of training and support they offer, as well as their method for advertising, including who pays for what.

Interview existing franchisees

Learn about the types of support offered by the franchise companies. You want to find out what it takes to succeed with each particular franchise.

Interview former franchisees

Learn why things didn’t work out for them. You might get an earful about the franchise company’s shortcomings, or you might hear the franchisee wasn’t really cut out for this type of business.

The knowledge you gain by going through this research process is indispensable to you in whatever business you start. As you’ve likely heard before, success happens where opportunity meets preparation. And your research is critical to your preparation.

Ready to make your dream of becoming an entrepreneur come true?

Get your free evaluation today!

Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a franchise coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.

© Dan Citrenbaum 2020

Read up on your new business before signing any contracts

When shopping for a new business, lots of first-timers choose a franchise for its many benefits, from a well-tested brand name and marketing program, as well as lots of back room support and training to help new business owners succeed.

But you have to do your due diligence to make sure you select the company that best matches your goals. When it comes to preparation, there are no short cuts. You have to read the fine print before signing any contracts.

The good news is that Federal Trade Commission requires franchise companies to disclose a great deal of information to help prospective franchisees learn everything they need to know to make a good choice.

You want to get a copy of the Franchise Disclosure Document for each franchise you’re seriously considering. Franchisors are required by law to provide you a copy at least 14 days before you’re asked to sign a contract or pay any money. You can ask for the document in any format convenient for you.

A franchise coach can help you through the nitty gritty of this process. As you begin your preliminary research, here’s what you should look for:

Franchisor’s Background

You want to know how long the franchisor has been in business. What’s the competition like? Pay close attention to the general business backgrounds of the company executives and how long they’ve been with the company.

Litigation history

Has the franchisor been involved in any litigation with their franchisees? Have any of its executives been convicted of fraud or other violations of franchise law? Have franchisees filed claims against the franchisor? You will also want to watch for any prior bankruptcies among the executives’ histories. These would all be red flags to further investigate.

Initial and Ongoing Costs

This is critical information since you never want to find yourself short on funds for matters that were clearly part of the cost of operating your business. Costs will include continuing royalty payments, advertising, business promotions, operating licenses, supply costs, cost to purchase discretionary equipment, cost of compliance with local municipal ordinances, and insurance, among others.

Only by estimating your costs can you realistically compare franchise operations to see if you might be able to earn more profit with another company.

Restrictions

Franchisors may restrict from whom you may order supplies, what you may offer for sale and where you can sell. Each franchisor will have different ways of determining a territory, which is meant to protect current franchisees but may not be satisfactory to you. For example, Dunkin’ Donuts has territorial restrictions limiting some franchisees from also offering 31 Flavors ice cream.

Training

While franchisors offer training, you need to know who is eligible for training and who pays. Are new employees eligible? Are support staff available for ongoing support? Again, make sure you know all the costs.

Advertising

Franchises often are asked to contribute a portion of their earnings for advertising. Get the details on what the franchisor requires. What percentage of the advertising budget is spent in your area? Will local advertising amount to extra out-of-pocket costs?

Current and Former Franchises

Plan on talking to as many current franchisees as possible. Ask them what you will need to do to succeed. Also talk to former franchisees to learn what went wrong for them. Make sure you also ask financial questions, such as their total investment, including unexpected costs and how long it took them to cover their initial investment and earn a reasonable income. What are their earnings? Franchisees’ income might vary quite a bit, depending on geographic area and other factors.

Financial History

You want to make sure the franchise company is financially stable since you certainly don’t want the company to go out of business just after you invested your money. You also want to ensure the franchisor has sufficient money to supporting its franchise system.

For more information, check out the FTC’s website, which has published a consumer guide to buying a franchise at http://www.business.ftc.gov/documents/inv05-buying-franchise-consumer-guide.

With a thorough due diligence, you can feel confident your new business will succeed for the long term.

Ready to make your dream of becoming an entrepreneur come true?

Get your free evaluation today!

Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a franchise coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.

© Dan Citrenbaum 2020

9 Critical Questions To Ask Franchisees

Franchisees are by far your best resource about a franchise. I would go so far as to say you should not consider buying a franchise without talking to at least a few of the franchisees first. I know I wouldn’t. Related: Ready For A Career Switch? Consider A Franchise You need to get a real sense of how the franchise’s promises pan out in the field. And franchisees are uniquely placed to give you the best answer to that question. Over the years as a franchise coach I have encountered various levels of commitment to the research I recommend. You need to cast as wide a net as possible to get a true representation of the folks operating this business. Franchisees are a diverse bunch, and you may find you don’t have a lot in common with the most successful of the franchisees in a system. This in and of itself is an important discovery. Maybe this franchise is not the right match for you. And if you can’t get many franchisees to talk to you, that’s another red flag. As they have once been in your shoes, franchisees generally are willing to share their experiences with you. Of course, they tend to be a busy group, so you may have to try a few times to get an appointment for a conversation that best suits their schedule. Here is what you want to learn from a franchisee:

9 Critical Questions To Ask Franchisees

1. Are you satisfied with the support you have received from the franchisor?

Franchisors offer various levels of ongoing support, which is particularly important for new owners to get the hang of the franchisor’s system. Has this been sufficient?

2. What type of training did you receive prior to opening?

Find out what the franchisor did to prepare the new franchisee for his or her new business. This would include training on equipment, technology, hiring, employee relations, and so on.

3. What was your background?

Was this a business in which the new owner had any experience? Get a feel for what it takes to run this business.

4. Why did you choose this franchise?

Did the franchisee go through an elaborate search process first? Or did they know someone who recommended it? You will learn how much research the franchisee did ahead of time so you can correlate this with how it’s worked out.

5. What do you like best about the franchise? Least?

Answers to these questions will give you a feel for some of what an owner does day to day. And how it’s working out.

6. How long have you been in business?

The longer the person has been in business, the more accurate read you can get on the learning curve of the franchisee. As a new business gets up and running, new owners generally take awhile before they get the hang of everything.

7. Have your earnings been what you expected?

Some franchisees may be reluctant to get into specifics on this point, but you should use sensitivity and try. Is there six figure potential with this business?

8. How long did it take you to reach break-even?

This is one of the most important pieces of information because you need to know how much money you need to set aside to pay your bills until your business starts to generate profits.

9. Knowing what you now know, would you buy this franchise again?

If the answer is no, it doesn’t mean you want to walk away. It depends what a representative sampling of other franchisees say. Not all franchisees are created equal. Some may not have been up to the task. 

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.

Buying A Business: How Much Research Is Too Much?

When looking to buy a new business, one of the most important steps is doing a thorough due diligence. The big question for many: How do you know you’ve done enough? One thing’s almost certain, if you think you’re done, you’ve probably only just begun. As a franchise coach, we always give our clients a great deal of assistance in this area, suggesting what to read, who to talk to and questions to ask. Ease of research and availability of information is precisely why we often steer folks to a franchise. With a franchise, you can get all the information you need in the Franchise Disclosure Document (FDD), which federal law requires all franchise companies make available to prospective new franchisees. With a little digging, you can learn if you’ve got what it takes — from the money, experience and skills — to succeed with this particular purchase. By far the most important part of the process is talking to franchisees to learn how the system works. You can find their contact information in the FDD. You want to find out: Are they making any money? Would they make the purchase again, knowing what they know now? This critical step separates the truly serious would-be entrepreneurs from those only dabbling — because if you can place calls to strangers to learn the ins and outs of a business, you pass the first hurdle toward succeeding with your own business. Using myself as an example, when I was researching the franchise I eventually bought, I called every one of the 42 franchisees then part of the system. Of course, not all of them called me right back — but that’s because they’re a busy bunch.

Patience And Perseverance

When reaching out to franchise owners you don’t know, a little patience goes a long way. Since you want as many perspectives on the business as you can get, it’s certainly worth your while to try a couple of times to connect. Don’t take it personally if a business owner fails to call you back in a timely manner. The call likely slipped to the bottom of their to-do list. But even the most successful, intimidating franchisees once stood in your shoes, and many will happily set an appointment to speak to you about their experiences, either on the phone or in person. The franchise business that I spent months researching, eventually interviewing 20 franchisees, now provides the lion’s share of my income. And it got there faster than I had projected. Putting the time and energy in upfront is like money in the bank. Its value accrues with time as you gain greater knowledge and intelligence to help your business thrive for the long term. 

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.